Google's market cap is $126 billion.. Still smaller than this new company, but close. Start a company with google's vision but for telcom and get a $150 billion market cap.. :-)

On Mar 5, 2006, at 9:56 AM, Frank Muto wrote:


AT&T Inc. is nearing the acquisition of BellSouth Corp. for roughly $65 billion, people familiar with the situation said Saturday evening. A deal
could be announced as early as Monday, these people said.

Final terms of the deal could not be learned Saturday evening, but these people said AT&T Inc. would pay a premium for BellSouth shares of at least 15%, valuing the company at $36 per share at least, up from its trading price Friday of $31.46. That would push the total equity value of the deal to at least $65 billion, plus the assumption of an additional $17 billion of
BellSouth debt.

Spokespeople for BellSouth and AT&T declined to comment.

An AT&T-BellSouth deal would effectively cleave the nation's telecom
services in two, each vertically integrated with a local phone operation, business services, and wireless unit. And it 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. The move would give AT&T Inc. sole control over Cingular, the
nation's largest wireless operator.

A combination between AT&T and BellSouth could have combined market
capitalization of nearly $160 billion, making AT&T far larger than rival Verizon. The deal would nonetheless set a showdown between AT&T and Verizon, as the two fight to control wireless, the growth portion of the telecom

It was the steep growth of Cingular -- joint owned by BellSouth and the former SBC -- that helped push the two firms together, say telecom bankers familiar with the space. As the importance of the wireless business grew, they say, it became inevitable that SBC (which adopted the AT&T name just
months ago) would consolidate its position in the South.

Put together, the SBC territory would extend from California to Florida, north to Illinois and south to Texas. Combining the two companies' current market capitalizations, AT&T would have a market value approaching $150
billion, over 50% greater than Verizon.

AT&T Chairman and Chief Executive Edward Whitacre has made a name for
himself in the telecommunications industry as a serial acquirer.
Mr. Whitacre is able to boast of a string of acquisitions including Pacific Telesis Corp., Ameritech Corp. and Southern New England Telecommunications Corp. But as he nears retirement the market had been anticipating one last hurrah from him; a BellSouth acquisition by AT&T has long been the subject
of speculation from analysts, investors and the two companies' rivals.

Still the speedy move to acquire BellSouth came as a surprise so soon after
Mr. Whitacre's takeover of AT&T Corp. last fall. His company is just
starting to digest the $16 billion acquisition. The former SBC
Communications Inc. took over AT&T Corp. and adopted the AT&T moniker. The new company dominates nearly every aspect of the industry, from high-speed Internet connections to long-distance phone service, as well as wireless.
And Mr. Whitacre now has access to the old
AT&T's enterprise business and world-wide network.

Such a deal would likely prompt howls of protest in some quarters as it comes on the heels not only of the AT&T-SBC deal but also after Verizon Communications Inc.'s acquisition of MCI. Those deals were approved with
only a few minor conditions despite concerns they would lead to higher
prices for business customers.
The wave of mergers has dramatically reshaped the telecom industry, and a purchase of BellSouth would further cement the recreation of the old Ma
Bell, which the
government pushed to break up in 1984.

The management of AT&T, which has apparently briefed key senior government officials late last week, appears to be betting that the Bush administration and a Bell-friendly Federal Communications Commission won't raise too many
obstacles for such a deal, arguing that the companies serve different
geographic regions and do not currently compete with one another in a
significant way.

Although AT&T and Verizon's last mergers passed both FCC and Justice
Department review with little major problems, the latest proposed merger may face more hurdles. Recent comments by AT&T and BellSouth executives about
their intentions to explore new revenue streams from their high-speed
Internet services by introducing two-tier or "premium" service for Internet
content providers. Concerns about those plans and the concept of "net
neutrality," or ensuring that consumers have open access to all Internet sites and services and businesses do not find their content slowed, has
become a major problems for the Bells in Washington.

Meanwhile, the FCC that will be reviewing the AT&T/BellSouth deal will
likely be a much different body soon with the addition of Robert McDowell, a veteran telecom lawyer who currently serves as assistant general counsel at
Comptel, which represents smaller telephone companies and was a vocal
opponent of the AT&T and Verizon mergers last year.

Mr. McDowell is scheduled to appear before a Senate committee on Thursday for his confirmation and is likely to be asked about the merger. Although
Mr. McDowell is a Republican, his nomination to the FCC was met with
noticeable unease by the Bell companies, which have privately expressed some concern his experience working with smaller competitors may make him less
than sympathetic to their concerns.

Frank Muto
Co-founder -  Washington Bureau for ISP Advocacy - WBIA
Telecom Summit Ad Hoc Committee

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