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Fri, Jan 28, 2005 - Page 12 News List

Regional phone company, AT&T in buyout talks

LAST CALL In a deal that would signal the end of the 120-year-old phone company, AT&T may be bought by US firm SBC for more than US$16 billion


SBC Communications, the second-largest regional phone company in the US, is in talks to buy AT&T for more than US$16 billion, according to executives close to the negotiations.

A deal, if reached, would be the final chapter in the 120-year history of AT&T, the first technological giant of the modern age and the original model for telecommunications companies worldwide. A deal would be a reunion of sorts, putting back together some of the largest pieces of the Ma Bell telephone monopoly, which was broken up in 1984.

The talks, which the executives described as "fluid" and "very, very sensitive" would unite SBC, a Baby Bell with some 50 million local-line customers, with AT&T, its much-diminished former parent.

AT&T, which only two decades ago ranked among the nation's very largest companies, is a shadow of its former self, focusing almost exclusively on corporate customers. Last year, AT&T said it would no longer market itself to its traditional retail customers.

Still, the executives cautioned that the talks could very well collapse. Indeed, AT&T has been in talks before. In 2003, negotiations between the company and BellSouth fell apart at an advanced stage when BellSouth saw how weak AT&T's prospects were. The executives involved in the current talks said that many issues, including a final price, had yet to be resolved.

Spokesmen for the two companies declined to comment.

The talks come as the telecommunications landscape has shifted from traditional fixed-line service to faster-growing, higher-margin businesses like wireless, broadband and corporate services. And with pricing wars continuing, telecommunications companies are looking to merge or risk being put out of business.

In theory, SBC and AT&T have complementary technology. SBC has a strong presence in California, Texas and Illinois, although, as with all the Bell companies, its fixed-line business has slid as customers use their cell phones more.

SBC has also made a strong push to sell broadband lines to consumers and is expanding its fiber optic network to provide video services in the coming year or two. The company also resells satellite television service from the DISH Network.

AT&T, on the other hand, has the largest international fiber network and the deepest client list of major corporations, which are considered valuable because they buy services in bulk. AT&T is also a major provider to the government and to companies that operate globally.

While SBC continues to grow slowly thanks to demand for its high-speed Internet lines, AT&T's business is expected to shrink about 15 percent this year. It is trapped in a vicious price war with its main rival, MCI. Verizon Communications, the largest regional Bell company, and SBC have also started marketing heavily to small businesses.

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