Report: Citicorp To Buy AT&T Card
NEW YORK (AP) _ The nation’s largest credit-card issuer, Citicorp, is on the verge of adding AT&T Corp.’s Universal Card to its portfolio for a price of between $3 billion and $4 billion, The Wall Street Journal reported today.
The agreement could be reached as early as today, the newspaper said, citing people familiar with the situation.
AT&T in October announced that it was selling its Jacksonville, Fla.-based credit-card operation, then the eighth-largest in the nation. AT&T Universal Card is one of the largest issuers of MasterCards and has more than 18 million cardholders for its combined credit card and telephone calling card.
The credit-card arm recently completed a financial turnaround by reducing credit losses below industry levels, decreasing operating costs and expanding its managed receivables to $14 billion. The company has about 3,000 employees in Jacksonville, 750 in Salt Lake City and 250 in Columbus, Ga.
Since last fall, AT&T has sold businesses worth more than $2 billion as part of a strategy to focus more on its core telecommunications business.
But since the Universal Card was introduced in 1990 with a guarantee of no annual fees, profitability has fallen off, the Journal reported. The business earned $24 million in the third quarter, half of the previous quarter’s earnings.
As competition in the industry increased, the no-annual-fee pledge meant AT&T had to rely only on Universal Card interest payments. The Journal said only 8.7 million of 19 million accounts were active last year.
Citicorp, with a U.S. credit-card portfolio of $46 billion, is trying to stay competitive with smaller but aggressive rivals such as Chase Manhattan Corp. and Banc One Corp. Its credit-card profits have remained high, but have fallen off.