Bell Mega-Merger: Please Deposit $62 Billion

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  • Ameritech

  • SBC Communications
  • Wait a minute -- didn't the feds break up Ma Bell already? In the latest, and biggest yet, deal to shake up the unsettled telecom industry, highly acquisitive SBC Communications announced it would buy Ameritech in a $62 billion stock swap. The combined entity would comprise three of the original seven Baby Bells with more than $40 billion in annual revenues, controlling some 57 million lines in 13 Western and Midwestern states. Only U.S. West now stands between SBC control of nearly three quarters of the U.S. Throw in telecom deregulation that should eventually allow local phone companies to enter the long distance market even as households are adding second and third lines for Internet access, and suddenly San Antonio-based SBC is starting to look an awful lot like the phone company of Lilly Tomlin's dreams. Wall Street was of course pleased with the news, sending Ameritech up $2.43 3/4 in early trading.

    If the merger passes regulatory muster, it could signal the start of a new round of combinations. Already AT&T and Bell Atlantic are both eyeing BellSouth as an attractive dance partner. And Ameritech could give SBC the muscle to realize CEO Edward Whitacre's long-held dream -- a takeover of the mothership via a merger with AT&T.

    Whitacre has said that in the not-so-distant future there will only be room for a few players on the telecommunications landscape, and SBC plans to be one of those. Paging Joe Klein -- maybe Microsoft isn't your biggest headache after all.