NEW YORK — In a move to bolster its wireless telephone business on the East Coast, AT&T Corp. said Monday that it will buy Vanguard Cellular Systems Inc. for $900 million in cash and stock and the assumption of $600 million of debt.
Vanguard Cellular, which has focused on rural and suburban markets and is based in Greensboro, N.C., has 625,000 customers. As of June 30, AT&T had 8.75 million wireless customers and more than 90 million communications customers worldwide.
The deal will expand on AT&T's 1994 acquisition of McCaw Cellular, which gave the New York-based telecom giant the largest area of wireless coverage in North America. Vanguard will fill in holes and expand AT&T's service throughout the East Coast, an intensely competitive wireless market, analysts said.
"AT&T already has the biggest wireless footprint [coverage area] in the country, but you can never be too rich, too thin or have too big of a footprint," said industry consultant Jeffrey Kagan, an analyst with Kagan Telecom Associates.
AT&T recently has moved aggressively to improve its wireless operations. In May, AT&T introduced a flat national rate, which has been well-received and has attracted new customers, analysts said.
Adding more flexible pricing plans and expanding service territories will help AT&T shift more of its customers' minutes of use to more lucrative wireless service from traditional phones, analysts said.
Under the deal, shareholders of Vanguard, which provides service under the Cellular One brand name, will get $23 a share in cash, or 0.3987 of an AT&T share. AT&T said it will issue about 7.8 million AT&T shares in the deal.
AT&T said half the $900 million will be paid in cash and half in stock. The companies expect the deal to close in the first quarter of 1999.
Vanguard shares jumped $1.44 to close at $21.31 in heavy Nasdaq trading, while AT&T shares lost $1.06 to close at $57.56 on the New York Stock Exchange.