AT & amp;T-BellSouth merger would re-create Ma Bell

Consumer activists are expected to fight the deal.
KNIGHT RIDDER NEWSPAPERS
SAN FRANCISCO -- AT & amp;T Inc. announced Sunday that it will buy regional-phone company BellSouth Corp. for $67 billion in stock, consummating a long-rumored deal that would create a gigantic communications provider with a reach extending deep into the phone, wireless, Internet and even pay-TV markets.
The acquisition would also give AT & amp;T sole control of Cingular Wireless, the biggest U.S. wireless operator with more than 54 million customers. AT & amp;T owns 60 percent, with BellSouth controlling the rest.
Under the agreement, AT & amp;T will exchange 1.325 of its shares for each share of BellSouth, representing a 17.9 percent premium compared with BellSouth's closing price Friday. That would give each BellSouth share a value of $37.09.
Atlanta-based BellSouth dominates local telephone service in nine Southeastern states, while San Antonio-based AT & amp;T operates in 13 states, concentrating in California, Texas and the Midwest.
A deal between AT & amp;T and BellSouth would bring their Cingular Wireless joint-venture under the control of AT & amp;T and establish a dominant communications provider with 70 million local telephone customers and almost 10 million broadband subscribers. In addition, AT & amp;T said in a statement that the three distinct brands in question would be moved to a single brand: AT & amp;T.
AT & amp;T Inc. was formed in November after SBC Communications acquired the old AT & amp;T and adopted the famous name as its own. By adding BellSouth, AT & amp;T Inc. would make itself the most formidable company in the communications industry and help the carrier to navigate a rising tide of competition from other phone operators or new rivals in the cable industry such as Comcast Corp.
Another Ma Bell?
In many ways, the former SBC has re-created the phone company once known affectionately as Ma Bell -- the longtime monopoly broken up in 1984 into one big long-distance carrier and seven local phone operators.
Assuming the BellSouth deal gets regulatory approval, AT & amp;T, Verizon Communications Inc. and Qwest Communications International Inc. would be the only Ma Bell offspring still in existence.
The AT & amp;T-BellSouth combination -- subject to approval from antitrust regulators as well as the Federal Communications Commission -- is sure to get plenty of attention in Congress. Consumer-activist groups are expected to vociferously oppose the deal.
Since Congress reshaped the nation's communications laws in 1996, consumer groups have been warning that a series of mergers would eventually create a Ma Bell East and a Ma Bell West.
Even so, phone companies have found it difficult to raise prices due to an onslaught of competition. Long-distance rates have been falling for years, while prices of wireless-calling plans and high-speed Internet access also have tumbled.
Only local phone rates haven't changed much. In that market, companies such as the new AT & amp;T, Verizon and BellSouth still dominate, though they've been losing access lines for years.
Indeed, it's been the loss of local lines that has spurred the frenzy of dealmaking. Phone companies have been beefing up and expanding into new markets in an effort to reignite growth and shield themselves from competition.
Many customers have switched to alternative technologies such as e-mail and wireless or to nontraditional companies such as cable giant Comcast or startup Internet-phone supplier Vonage.
BellSouth was the only major Ma Bell offspring to eschew big mergers, although it explored its options on a number of occasions. The company's failure to bulk up put it at a competitive disadvantage to larger rivals AT & amp;T and Verizon.