RealTime IT News

It's The End of Ma Bell As We Know It?

AT&T's Chief Executive Officer Mike Armstrong is reportedly in talks with BellSouth about a merger of equals, according to BusinessWeek.

The magazine said AT&T sent President David Dorman to BellSouth in mid-September with the offer: AT&T will spin off AT&T Broadband and then merge its remaining telecom businesses with BellSouth, giving the combined company the heft to compete with industry giants SBC and Verizon in both long-distance and business services.

BellSouth is barred by the Telecom Act from owning large stakes in cable, which rests at the core of AT&T's AT&T Broadband business.

According to BusinessWeek, BellSouth CEO Duane Ackerman is interested in a merger if he feels the price is right. The magazine said the deal has not yet been valued, and potential management for the combined company has not been determined. However, the magazine also reported that AT&T wants to cement a deal by October.

A number of hurdles do exist. First, BellSouth is also barred from offering long-distance services in the nine Southern states in which it offers local telephone service. BusinessWeek said AT&T is confident it can get a deal approved with conditions. Also, the wildly different market capitalizations of the two companies could put the kibosh on a "merger of equals." If AT&T sells AT&T Broadband, the company should have a market cap of between $30 billion and $40 billion. BellSouth has a market cap of $79 billion.

In related news, The Wall Street Journal Thursday reported that Comcast Corp. is expected to sign a confidentiality agreement with AT&T that would clear the way for Comcast to revive its bid to acquire AT&T Broadband. The Journal said Comcast may sign an agreement as early as Friday.

Comcast originally refused to sign such an agreement after making a $40 billion stock swap bid for AT&T Broadband -- which included the assumption of about $13.5 billion in AT&T debt -- because of AT&T's insistence on a "collusion clause" which would prevent the company from conferring with other companies interested in bidding on AT&T Broadband.

The Journal said it was unclear whether such a clause would be included in the new agreement.

If Comcast does sign an agreement, talks are expected to resume shortly thereafter.