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AT&T back together again

$67bn merger

The smart choice: opportunity from uncertainty

Unlike Humpty Dumpty, the United States' former telecomms monopoly looks set to reassemble itself, only 22 years after being broken up by a historic anti-trust action - and less than ten years since Congress permitted the RBOCs, or 'Baby Bells', to merge.

AT&T and BellSouth have announced their intention to join forces in a deal worth $67bn.

But then Humpty Dumpty didn't have at his disposal the miracle of debt financing, which has turned one of the US' smallest telecomms companies into the largest, in only five years.

In reality, AT&T is using stock to buy out the largest remaining legacy of the RBOCs. SBC, an amalgamation of Baby Bells that covers 13 states stretching from coast to coast, including Texas, California, Illinois and Ohio, bought AT&T for $16bn last year, and adopted the AT&T name.

In addition to controlling 23 states, the new AT&T will own 100 per cent of Cingular Wireless, the largest cellular carrier in the US. Cingular acquired AT&T Wireless two years ago, after it had been spun out from AT&T in 2001.

Ed Whitacre, the AT&T CEO, will become chairman and CEO of the merged company.

So in place of a monopoly, there's now a duopoly, with Verizon - which also coalesced out of an amalgamation of Baby Bells, and AT&T controlling the United States' telecomms infrastructure.

Both duopolists are expected to step up 'triple play' offerings of voice (fixed and mobile phone), TV and internet to the consumer market, squeezing out independent operators.

Names such as Skype and Google, and buzzwords such as VoIP and WiMAX provide the regulators with the fig leaf they need to nod through the merger. In reality any plucky little incumbent-challenger is dependent on the good will of the duopoly to continue the business of challenging the incumbents. ®

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