Is BellSouth next for Whitacre, AT&T?

Many in the telecom industry expect the new AT&T - the carrier formed from the merger of the old AT&T and SBC - to continue to acquire companies and assets. One target that is named frequently is BellSouth , a prospect that inevitably would raise regulatory and antitrust concerns.

AT&T would like to gain tighter, if not full control of Cingular Wireless, which it jointly owns with BellSouth. AT&T recently disclosed that it plans to market its Cingular wireless service under the AT&T brand.

Some analysts view this as a precursor to a more significant event that would bring all businesses and brands under one roof, a prospect some on Wall Street find attractive, because wireless has overtaken wireline as the growth market in telecom.

"Joint ventures don't last forever," says Tim Horan, a telecom services analyst at CIBC World Markets. "It makes sense to have things change one way or the other."

AT&T and BellSouth declined to comment.

Horan says a merger makes more sense than a breakup. AT&T Chairman Ed Whitacre is no wilting violet when it comes to big deals. He did, after all, acquire AT&T for $16 billion while he was head of SBC.

"Wall Street has been giving the new AT&T strong recommendations," says Judy Reed Smith, CEO of market tracker Atlantic-ACM. "If they feel confident in their growth and in this purchase that they've just completed, then I can see that Whitacre might go for one more."

Before the AT&T acquisition, SBC, under Whitacre, acquired a series of Bell operating companies - including Pacific Telesis and Ameritech - to form a much larger SBC. And last year, Whitacre helped pull together Cingular's $41 million acquisition of AT&T Wireless.

He might like the prospects of picking up BellSouth, which in addition to creating brand unity, would add residential and business customers in BellSouth's nine-state territory in the Southeast, as well as national and international business customers from AT&T's global presence.

"They get a bigger footprint on the access side and control of Cingular, and they can integrate things a little bit easier," Horan says. "There's no real overlap."

But other observers believe such a union will face almost insurmountable regulatory and antitrust hurdles.

"As attractive as this would be to a lot of people, it just seems to me like right now this is going to have some formidable barriers to it," says Thomas Nolle, president of consultancy CIMI. "It's hard for me to believe that this is something that could happen quickly."

Atlantic-ACM's Smith adds, "If they acquire BellSouth, then they have quite a bit of the country covered. It does get to look more like the old AT&T" monopoly.

Reed believes Verizon would bid against AT&T for BellSouth.

Horan doesn't see any regulatory or antitrust hurdles for an AT&T/BellSouth union given that SBC and Verizon have smoothed the way through their purchases of AT&T and MCI, respectively.

"It kind of makes sense that they would do it now while . . . they're changing the brand name to AT&T, but these things are never easy to get done," he says. "This current situation is not going to be around forever. Either they merge together or they kind of break up, one or the other. A merger makes more sense for both, but just don't know about the timing," he adds.