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SBC Communications in Merger Talks to Buy AT&T

Posted on: Friday, 28 January 2005, 00:00 CST

Jan. 28--A Baby Bell might buy Ma Bell -- AT&T Corp. -- which pioneered telephone service more than a century ago but has floundered since the mid-1980s amid regulatory changes and increasing competition.

SBC Communications is in merger talks to buy AT&T for at least $15 billion, The New York Times and The Wall Street Journal reported yesterday.

Spokesmen from AT&T and SBC, the No. 2 telephone company after Verizon, declined to comment.

SBC is attracted to AT&T's strength in the corporate sector and would likely keep the AT&T name because of its wide recognition and good reputation among businesses, said David Willis, senior research analyst at the META Group, a research company in Stamford, Conn.

Regulators would likely approve such a deal, analysts said.

AT&T's residential business, on the other hand, was once its core but has faced more competition amid lower profits as cellular service providers and cable companies edged their way into the phone business. So last year, AT&T, based in Bedminster, N.J., discontinued marketing residential long-distance service to new customers.

With AT&T's retreat, a merger wouldn't eliminate a major player in residential service, and many other rivals have emerged, so the deal wouldn't hurt consumers, said Boyd Peterson, analyst at the Yankee Group, a Boston-based technology research company.

"When you think of AT&T as that icon and you think of everything that it used to be, it looks like 'Wow, we're going back to the way it was -- where it's one big company -- but the environment is so utterly different from a competitive perspective that there's no way we can go back," Peterson said.

Still, an AT&T merger with a smaller competitor would be better for consumers, said John Breyault, research associate at the Telecommunications Research & Action Center, a consumer group based in Washington, D.C.

"Consumers need to be concerned about consolidation and choice in the industry," Breyault said. "We believe it would be better if AT&T were sold to someone other than the two largest carriers ... instead of helping to create a national duopoly."

AT&T's roots go back to 1875 when Alexander Graham Bell formed a partnership as he was trying to invent a "talking telegraph" -- a telephone. But as AT&T lost its monopoly, the company has yo-yoed like an unsuccessful dieter.

In 1984, a federal antitrust suit forced the company to split, restricting AT&T to long-distance service and spawning seven Baby Bells offering local service, including SBC and NYNEX, now Verizon.

"AT&Tdidn't really understand what business it was in and made so many wrong moves," said Willis, of the META Group. "Time and time again, they still behave like they have complete control of the market."

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Source: Newsday, Melville, N.Y.

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