The proposed SBC-Ameritech deal puts renewed pressure on AT&T Corp. to make a big move into the US local phone business, and may clear the path for the telco to make a blockbuster deal of its own.
Under new CEO Michael Armstrong, AT&T has moved to shore up its long-distance customer base and enter local markets with January's US$11 billion acquisition of Teleport, a supplier of local services to big business customers. But analysts said AT&T must do more, and fast, or risk falling to second-tier status.
"If the SBC-Ameritech merger goes through, AT&T will no longer be the dominant Big Bell phone company," said Jeffrey Kagan, an industry consultant who runs Kagan Associates in Atlanta. "Instead of Ma Bell, AT&T will be Grandma Bell."
Repeating the mantra that the telecommunications industry is narrowing into a handful of major players capable of offering a range of integrated services, Kagan said, "They really need to do a big deal in order to remain competitive."
Among candidates frequently mentioned as possible merger partners with AT&T are GTE and Bell Atlantic. Investors favored GTE on Monday, bidding its stock up 1-1/2 points to $60.
"I don't think there was ever a significant problem with AT&T pairing off with GTE," Prudential analyst Guy Woodlief said, noting that key regulatory hurdles that hamper Baby Bell mergers do not apply to GTE, a Baby Bell-sized local phone giant that has already been freed to offer long-distance services.
A GTE spokeswoman declined to comment on any possible merger it might be considering. She said the Stamford, Connecticut-based company had made no significant announcements that might be behind the stock's rise Monday.
AT&T attacked the SBC-Ameritech deal as anti-competitive, characterizing it as "SBC's most recent attempt to expand its local monopoly to another 20 million customers in the Midwest."
Echoing the language used by regulators to quash AT&T's proposed merger with SBC a year ago, AT&T said that state and federal regulators "shouldn't even think about allowing this latest deal to go through" until SBC and Ameritech open up their local networks to greater competition.
