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Cingular, AT&T Wireless Talking Merger

In a conference call with reporters last week, SBC CEO Ed Whitacre, Jr., said expanding the footprint of Cingular, the wireless carrier the company co-owns with BellSouth , is among his 2004 goals.

Whitacre said there is still a gap between what Cingular is willing to pay and the price demanded by potential takeover targets, but he went out of his way to stress interest in exploring a deal.

Whether it was Whitacre's openness, or other factors, such as an improving economy, Cingular is reportedly at the negotiating table with AT&T Wireless .

The companies have held similar talks over the last year, but according to Reuters news agency, talks have gained new life.

An AT&T Wireless spokesman declined to comment, while Cingular spokesmen were not immediately available.

If a deal could be hammered out, the merger would combine the second-largest (SBC) and third-largest carriers (AT&T Wireless), resulting in a voice and data subscriber base of about 55 million.

It could also spark long-anticipated consolidation in the sector among the six national wireless carriers..

Industry watchers said while a cash acquisition could occur, Cingular, which is private, could implement a reverse merger, and use AT&T's public structure.

SBC owns 60 percent of Atlanta-based Cingular, while BellSouth claims the remaining 40 percent. Both companies are said to support the idea of the AT&T Wireless buy.

"The reverse merger seems preferable to buying (AT&T Wireless) for cash, then doing an IPO of Cingular later in the year," analysts in SG Cowen's telecom group wrote in a note to investors today.

The firm expects AT&T Wireless' operating result to be weak over the next few quarters, as the company strives to improve network quality and customer service. Longterm however, it believes the company's cost cutting plan is on track.

News of the acquisition talks pushed AT&T Wireless shares up 67 cents, or nearly 8 percent, to 9.22 at midday on heavy volume.