Ma Bell, Baby Discuss Merging $50 Billion Deal Between At&T;, Sbc Would Be The Largest In History
Thirteen years after the breakup of Ma Bell, AT&T Corp. and a company formed by two of its Baby Bell offspring are talking about reuniting in a record $50 billion-plus merger, a source said Tuesday.
A combination of AT&T and SBC Communications Corp. would be the largest merger ever and would radically reshape the telecommunications landscape, which has seen a number of multibillion-dollar deals this past year.
There was no indication a deal was imminent, said the source familiar with the negotiations, speaking on condition of anonymity.
A combined AT&T and SBC would have 60 percent of the $80 billion long-distance market and dominate local phone and wireless services throughout the Southwest and California.
That means any deal would face numerous obstacles from regulators and competitors.
SBC owns Southwestern Bell and Pacific Telesis, operating in California, Nevada, Texas, Oklahoma, Kansas, Missouri and Arkansas. AT&T has been struggling to expand beyond its sluggish longdistance business, but thus far has been slowly entering markets for local phone service.
A combination would be the first joining of AT&T and any regional Bell phone company since they were formed in the 1984 split-up of AT&T.
AT&T spokeswoman Ruthlyn Newell would not comment. Nor would SBC spokesman Larry Solomon in San Antonio.
A combined AT&T and SBC would have $80 billion a year in revenue and 230,000 workers.
A key regulatory issue would be whether a merger stifles competition in AT&T’s and SBC’s main markets and threatens to drive up prices. Since their businesses overlap in many markets, the two companies could be forced to divest some operations.
In addition, under federal telecommunications rules, SBC is barred from competing in the longdistance market until its own local market opens to rivals.
David Roddy, chief telecommunications economist at the Deloitte & Touche Consulting Group, said that AT&T and SBC will have to build a strong case they’re not shutting out competitors.
A deal “can be done. But it won’t be easy and will take some time,” Roddy said.
AT&T also has made merger inquiries of other telecommunications companies, including GTE and two other Baby Bells, Bell South and Ameritech, the source said.
Its talks with SBC reached a more serious stage last week with discussions centering on ways of making a deal pass muster with regulators, the source said.
The Justice Department’s antitrust division had no information about the deal beyond what was reported in the Journal. Its reviews do not start until a deal has been signed.
In a related development, buying of AT&T Corp. options increased last week, before Tuesday’s news that AT&T and SBC may merge.
The trading activity suggests that some investors got an early chance to profit from the potential deal.
Trading in certain AT&T call options averaged 907 per day last week, higher than the daily average of 244 in the prior four weeks. Investors buy call options on a bet that the price of the underlying stock will rise.