IP Democracy: WSJ: AT&T to Buy Bell South for $65 Billion

The Wall Street Journal is reporting that AT&T is going to buy BellSouth for $65 billion, a mega-merger that would radically change the nature of communications competition in the U.S. The deal, purportedly slated for announcement as early as Monday, would make AT&T the largest communications company in the U.S., and possibly the world.

The acquisition of BellSouth would give AT&T — a telecommunications giant already following SBC’s acquisition of AT&T — the biggest broadband footprint in the world and a wireline voice market share that far surpasses half of all homes in the U.S. At the end of 2005, the two companies served a combined broadband customer base of nearly 10 million, more than the current top-ranked broadband provider Comcast, which served 8.5 million broadband subscribers at the end of 2005. (more after table)

AT&T and Bell South Key Statistics
Q4 05 in mil.
	AT&T	BellSouth	Combined
Total Access Lines	49.4	20	69.4
Total DSL Subs.	6.92	2.89	9.81

As the table also shows, the two companies had a combined access line count of 69.4 million at the end of 2005, far larger than Verizon’s 48.8 million. A combined AT&T-BellSouth would push Verizon to a distant second in domestic telecom reach. According to the Journal, AT&T and BellSouth have a combined market cap of $150 billion, over 50% greater than Verizon.

Finally, a combined AT&T-BellSouth would place wireless voice leader Cingular fully under AT&T’s control. Cingular, which served 54.1 million voice customers at the end of 2005, is currently a joint venture between the two telcos.

The Journal piece contains this puzzling assertion about the combination:

[I]t would effectively validate the vision of competition laid out by the government — one in which traditional telecom firms compete directly against cable operators rather than against each other.

I’m not sure what government vision this refers to (1996 Telecom Act?), but it is clear that some parts of the government, namely the antitrust authorities, might look askance at the deal given the stepped-up concentration in wireline telephony, among other characteristics of the combination.

And you can bet that cable operators, communications workers, Internet content and applications providers and a host of other affected parties are going to come out swinging once the deal is finally announced.

Update: Reuters is reporting that the deal is expected to be announced today, Sunday March 5.

Posted by Cynthia Brumfield on March 5, 2006 12:58 AM to IP Democracy