T

For many years, the American Telephone & Telegraph Company was the most widely-held stock in the United States. Not only was it a regulated utility, with guaranteed rates of return on capital, making it the archetypal “widows and orphans” stock, but it was also one of the country's largest private employers, and encouraged its employees to invest their savings in company shares. Known among Wall Street brokers and traders simply as “Telephone”—what other phone company was there?—it was one of only twenty-six companies granted a single-letter ticker symbol: “T”. But after the 1984 breakup of AT&T into separate regulated local telephone companies, and an unregulated national long-distance company which kept the AT&T name, the luster began to come off. Certainly it didn't help that the local phone companies, known as “Regional Bell Operating Companies”, were ultimately allowed to compete aggressively with AT&T on its own turf, long distance, but the problems began well before that. Any monopoly, of course, can only lose market share once its market is opened up to competition. But AT&T management compounded that loss by entering into a series of ill-fated business combinations. The company eventually fell victim to the ultimate indignity, being swallowed up by one of its children, SBC Corp., in late 2005.

Let us consider what would have happened to a hypothetical 100 AT&T shares purchased on January 2, 1970 (just one day into the Unix epoch). Those shares would have cost about $4,950 (depending on the time of day the trade was executed), or about $30,000 in 2014 dollars. On December 30, 1983 (the day before the divestiture), those 100 shares were worth $6,150; the next business day, they were worth only $1,800, but the investor also received ten shares each of the seven Regional Bell Operating Companies: Pacific Telesis, U S West, Ameritech, Southwestern Bell, BellSouth, Bell Atlantic, and NYNEX. In the divestiture, 28.5% of the value of the old “Ma Bell” was assigned to the new AT&T, with the rest being divided among the “Baby Bells”.

Let's follow each of the successor companies individually. We'll start with NYNEX, the smallest in territory of the RBOCs but important to Wall Street as it was the local phone company for most of New York State including Manhattan. NYNEX had two 2-for-1 stock splits during its period of existence, so on August 14, 1997, the hypothetical shareholder would have held 40 shares of NYNEX. On that day, NYNEX merged with Bell Atlantic.

So next we consider Bell Atlantic (ticker “BEL”). Prior to the merger with NYNEX, Bell Atlantic also had two 2-for-1 stock splits, giving our investor 40 shares of BA on August 14, 1997. On that day, she would have received 30 new shares of BA in exchange for her 40 shares of NYNEX, plus $53.44 in cash to settle the fractional shares resulting from the merger. In 1998, Bell Atlantic had another 2-for-1 stock split, leaving our investor with 140 shares of Bell Atlantic, now Verizon Communications (“VZ”), which today is worth $33.81 per share or $4,733 in total.

U S West was the second-smallest of the Regional Bell Companies after divestiture, and was allocated 8.94% of the cost basis of old AT&T. As with all the other RBOCs, AT&T shareholders received ten shares of U S West (the odd typography is the company's, not mine), under the ticker symbol “USW”. Like the other companies we have considered so far, U S West had two 2-for-1 stock splits before its finances began to get really complicated. On November 1, 1995, the company created a tracking stock for its “new media” assets, mostly cable television systems it had purchased over the years. All shareholders of U S West received a share of the tracking stock (ticker “UMG”) for each share of USW, so at this point our investor has 40 shares of USW and an equal number of UMG. In June, 1998, U S West Media Group merged with Amos Hostetter's Continental Cablevision to form MediaOne Group. As a result of an asset reclassification prior to the merger, UMG shareholders received additional USW stock; our investor would have received $4.67 in cash and one additional share of USW. We'll pick up the MediaOne story later. Two years later, the end came for U S West as it merged into Qwest; for her shares, our hypothetical shareholder received 70 Qwest shares and $49.94 cash in lieu of fractional shares. She ends this part of the story on July 1, 2000, with 70 shares of “Q” and 40 shares of “UMG”.

Now things start to get really complicated, as we draw together the threads that make up today's AT&T Inc. First up is Ameritech Corporation (“AIT”), which merged with SBC on October 8, 1999. By the time of the merger, stock splits would have multiplied our investor's holdings to 120 shares. These shares were converted into 157 shares of SBC plus cash in lieu of 0.92 share.

Pacific Telesis Group (ticker “PAC”) was the smallest of the “Baby Bells”, serving parts of California and Nevada, but with large “Independent” presences in both states resulting in a smaller customer base than one might otherwise have expected. Pac*Tel, as it was universally known, had two 2-for-1 stock splits in the 1980s giving our investor 40 shares. Pac*Tel's AirTouch wireless unit was spun off on April 1, 1994 at a 1-for-1 ratio. When AirTouch merged with Vodafone Plc on June 30, 1999, our investor would have received $360 in cash consideration, plus 20 Vodafone Airtouch ADSes (which split 5-for-1 a few months later). Pac*Tel merged into SBC on April 1, 1997, and our shareholder's 40 PAC shares would have become 29 shares of SBC plus cash in lieu of 0.258 share.

BellSouth is the only one of the original seven RBOCs not to have engaged in financial fun and games during the 1990s; until 2006 it had remained essentially the same company as it was upon Divestiture in 1984. Its stock was been one of the better performers of the group, with four stock splits giving our hypothetical investor 180 shares.

Southwestern Bell is the last of the “Baby Bells” we must consider. Trading under ticker symbol “SBC”, Southwestern Bell spent the first decade of its life in a mode not dissimilar to its six sisters, with two stock splits giving our hypothetical investor 60 shares by 1994. The company changed its name to “SBC Communications” before going on a buying binge, swallowing up three of its sister companies, as noted above, and eventually taking over Mother herself. Taking into account the Pacific Telesis acquisition, a 1998 stock split would have left our investor with 178 shares. Add to that 157 shares converted from Ameritech and as of 2005, our shareholder would have had 335 shares of SBC.

Before we pick up the thread of AT&T Corp. again, we have to consider the fate of U S West Media Group, which became MediaOne Group after merging with Continental Cablevision. Our investor received 40 shares of “UMG” as a result of the spin-off from U S West. On June 15, 2000, MediaOne Group became part of AT&T, with MediaOne shareholders having a rather confusing selection of mostly-cash, half-cash-half-stock, or mostly-stock. To avoid as much of the confusion as possible, we'll just assume that our hypothetical shareholder took the mostly-stock option, which gave her $340 in cash, plus 59 shares of AT&T common stock, plus another $21.75 in cash in lieu of fractional shares.

As part consolation for the breakup, AT&T was allowed to keep its equipment-manufacturing arm, Western Electric, and its hugely important research arm, Bell Laboratories. But on September 17, 1996, these businesses (with the exception of a few parts of the Labs) were spun off as Lucent Technologies (ticker “LU”). AT&T did not have any stock splits between 1984 and 1996, so our investor still had her 100 original “T” shares. She would have received 32 shares of Lucent plus cash in lieu of 0.4084 share.

In the early '90s, AT&T decided to bulk up its flagging minicomputer business by acquiring National Cash Register (known far and wide as “NCR”). It didn't work, and on December 31, 1996, NCR was spun back off again. Our hypothetical AT&T shareholder received 6 shares of NCR plus cash in lieu of 0.25 share. In April of 1999, AT&T had a 3-for-2 stock split, giving our investor 150 shares. NCR split 2-for-1 on December 31, 2004.

On September 30, 2000, Lucent spun off a random selection of businesses as Avaya (ticker “AV”), at a 1-for-12 ratio. Lucent had two 2-for-1 stock splits prior to this, so our investor's 128 shares of Lucent would have given her 10 shares of Avaya. Lucent's microelectronics business was spun off as Agere Systems on June 1, 2002, with a rather complex allocation involving two different classes of Agere stock. Our investor would have received 1 share of Agere class A stock, plus cash in lieu of 0.379771392 share, and 33 shares of Agere class B stock, plus cash in lieu of 0.86406528 share. (This bizarre structure was designed to make the spin-off tax-free to Lucent shareholders.)

On Novembr 11, 2006, Lucent was purchased by French competitor Alcatel, in an all-stock deal at a ratio of 1 Lucent share to 0.1952 Alcatel-Lucent ADS. Our investor would have received 24 shares of Alcatel-Lucent and cash in lieu of 0.9856 share.

In July, 2001, AT&T exited the cellular telephone business, spinning it off as AT&T Wireless (“AWE”), which had existed for a few years previously as a tracking stock. By this time, our investor had 209 shares of AT&T common stock (after taking account of the MediaOne merger), so she would have received 67 shares of AT&T Wireless, plus cash in lieu of 0.2562 share. AT&T Wireless was purchased by Cingular, a partnership of SBC and BellSouth, in 2004 for $15 cash per share, closing out this position at $1,005 even.

On November 18, 2002, AT&T investors finally got rid of Mike Armstrong, sending him and his huge cable TV investment to Comcast. This transaction was immediately followed by a 1-for-5 reverse stock split, so our shareholder's 209 shares of AT&T stock would have turned into 67 shares of Comcast class A common (“CMCSA”) plus $16.04 cash in lieu of a fractional Comcast share, and 41 shares of new AT&T common stock plus $10.81 cash in lieu of a fractional AT&T share.

On May 27, 2005, Agere Systems untangled its complex share class structure, replacing the two original classes of stock with a single class, and at the same time taking a 1-for-10 reverse split. As a result, our investor would have received 3 shares of new Agere stock (still under the ticker “AGR”) and $4.92 cash in lieu of a fractional share. In December, 2006, Agere agreed to be purchased by LSI Logic Corporation in an all-stock deal, giving Agere shareholders 2.16 shares of LSI for each AGR share they hold. The deal closed in April, 2007, at which point our investor would have received six shares of LSI plus cash in lieu of 0.48 share. After the merger was completed, LSI Logic changed its name to LSI Corporation.

On November 18, 2005, AT&T was purchased by SBC. After the purchase closed, SBC renamed itself “AT&T Inc.” and after a wait of a few weeks received AT&T's old ticker symbol, “T”. Our hypothetical shareholder's 41 shares of AT&T would have been converted into 31 shares of SBC stock, plus cash in lieu of 0.95622 share.

In early 2006, BellSouth agreed to be purchased by “new AT&T” in an all-stock deal giving BLS shareholders 1.325 shares of AT&T stock. After waiting most of the year for FCC approval, this transaction finally closed on December 29, 2006, and our investor would have received 238 T shares for her 180 shares of BellSouth, plus cash in lieu of half a share.

On November 20, 2006, Verizon spun off its directory publishing business, forming Idearc, Inc., with Verizon shareholders receiving one share of IAR for every twenty VZ shares they owned. Our investor would have received 7 shares of Idearc. On March 31, 2009, Idearc filed for Chapter 11 bankruptcy protection, rendering those shares worthless.

On January 8, 2007, NCR announced plans to spin off its database division, Teradata, as a separate company. NCR shareholders received one share of Teradata for each share of NCR they owned on September 14, 2007.

In February, 2007, Comcast announced a 3-for-2 stock split. Our hypothetical investor would have received an additional 33 shares, plus cash in lieu of half a share.

On June 4, 2007, Avaya announced that it would be taken private by an investor group led by Silver Lake and TPG Capital. When the deal closed on October 26, 2007, our shareholder would have received $17.50 in cash per share, for a total of $175.

On March 31, 2008, Verizon spun off its wireline operations in Maine, New Hampshire, and Vermont, with the resulting company then merging with FairPoint Communications at a ratio of one FairPoint share per 53.0245 Verizon shares, giving our investor two FairPoint shares and $4.59 cash in lieu of a fractional share. FairPoint filed for Chapter 11 bankruptcy protection on October 26, 2009.

On April 21, 2010, Qwest Communications agreed to be acquired by CenturyLink in an all-stock transaction, with Qwest shareholders receiving 0.1664 share of CenturyLink for every share of Qwest they owned. Our investor would have received 11 shares of CenturyLink plus cash in lieu if 0.648 share when the merger was consummated on April 1, 2011.

On July 1, 2010, Verizon spun off additional wireline operations in fourteen states (including the entire state of West Virginia) to Frontier Communications; VZ shareholders received Frontier stock at a rate of 4.165977 to 1, so our shareholder would have received 33 shares of Frontier plus $4.35 cash in lieu of a fractional share.

On September 2, 2013, Verizon agreed to buy Vodafone's 45% interest in Verizon Wireless for $130 billion in cash, stock, and other consideration. On the completion of the transaction, all of the Verizon shares and some of the cash would be distributed to Vodafone shareholders; as a part of the deal, Vodafone would also buy out Verizon's interest in Vodafone Italy. Vodafone UK shareholders received 0.0263001 VZ shares for every Vodafone share, and Vodafone subsequently implemented a 6-for-11 reverse split, but the Vodafone ADSes represent 10 Vodafone UK (“ordinary”) shares. To keep the ADS-to-ordinary share ratio the same, the ADSes performed the same reverse split as the ordinary shares. Thus, our investor received 26 VZ shares, plus a cash dividend, cash in lieu of 0.3001 fractional Verizon share, 54 new ADSes, and cash in lieu of 0.545 new ADSes. (Whew!)

On May 6, 2014, the Singapore firm Avago Technologies completed its acquisition of LSI Corp. for $11.15 per share, with our hypothetical investor receiving $66.84 for her 6 LSI shares.

So to sum up, someone who purchased 100 shares of AT&T common stock on January 2, 1970, would now own the following:

Analysis by Garrett A. Wollman, based on public information from the Securities and Exchange Commission's EDGAR database and the investor relations departments of Alcatel-Lucent, Avaya Communications, AT&T Inc., Comcast Corp., FairPoint Communications, LSI Corp., NCR Corp., Qwest Communications, Verizon Communications, and Vodafone Group plc. Values based on NYSE and NASDAQ closing prices as of May 7, 2014. See any errors? Send mail to wollman@bimajority.org.

Revision history: Updated 2006-03-14 to correct Lucent, Avaya, and Vodafone totals; thanks to Sam Webb. Also added information about the T/BLS merger announced shortly after the original release of this article. Updated 2007-01-28 to reflect the Lucent-Alcatel merger, the final details of the BellSouth-AT&T merger, and NCR's proposed spinoff of Teradata. Updated 2007-06-05 with more details on the Teradata spin-off and the sale of Avaya. Updated 2007-12-22 with the final details for the sale of Agere Systems, the sale of Avaya, the Comcast 3-for-2 stock split, the NCR-Teradata spin-off, and the Verizon-Idearc spin-off, and initial information about the proposed Verizon-FairPoint transaction in Northern New England; thanks to "Claudia". Updated 2009-10-18 to reflect the Idearc bankruptcy and Verizon-FairPoint transaction. Updated 2010-11-15 to reflect the spinoff of some Verizon operations to Frontier. Updated 2014-05-07 to reflect the merger of Qwest with CenturyLink, the sale of LSI Corp. to Avago, and the Verizon-Vodafone share distribution and reverse split.