"Today's agreement is a huge step forward in our efforts to build a company that will lead an American communications revolution in the 21st century," says Edward E. Whitacre Jr., chairman and chief executive officer of SBC. "We are combining AT&T's national and global networks and expertise with SBC's strong platforms and skills in local exchange service, wireless and broadband. It's a great combination."

Whitacre will remain in his position as chairman and CEO, while AT&T CEO David Dorman will serve as president. Both will serve on the board of directors, with two other AT&T board members joining the newly merged company's board. SBC will remain headquartered in San Antonio, Texas.

According to research and analysis firm Netcraft, the acquisition will also boost SBC's Web hosting profile as AT&T holds a stable of high-profile hosting customers, including Kodak, Marriott Corporation, 1-900-Flowers, the Pixar animation studio, the US Olympic Committee and to several agencies of the US government.

AT&T also hosts cable provider Comcast Communications's (comcast.net) high-speed Internet service. However, analysts believe it is unlikely Comcast, which competes directly with SBC in the high-speed Internet access space, will continue hosting with AT&T.

According to Netcraft's data, AT&T currently houses approximately 84,000 hostnames, including 43,000 on Windows, 14,900 on Linux and 13,600 on Solaris. SBC hosts 136,000 hostnames on 75,000 Windows severs, 24,000 Linux servers, 23,800 Unix servers and 3,400 Solaris servers.

SBC's interest in AT&T was based largely on its valuable corporate services division and international network. AT&T's global network spans 50 countries, with 13 data centers in the United States and 13 outside the US.

The two companies have reportedly engaged in several rounds of discussions in the past.

The deal, subject to approval by AT&T shareholders and customary closing conditions, is expected to close in the first half of 2006.