AT&T, BellSouth wedding off … maybe


When I was a little boy, my sweet old grandmother used to tell me story about a little Shepard boy who lived in the foothills of Northern India with his tiny little family in a quaint little village. He was nothing spectacular, and no one paid much attention to what he had to say.

Craving the spotlight, he one day screamed, “Wolf!” and suddenly the whole village, which depended on sheep rearing for its livelihood, gather around him, very excited. Having figured out that, “Wolf!” was the magic word to get attention, he tried it a couple of more times, with decreasing effectiveness. And one day, the Wolf really came, ate-up all the sheep, and of course the little boy!

Why am I recounting this story now? Because of all the talk about AT&T and BellSouth merger! The little boy looking for attention is the Wall Street, and crying Wolf, or merger is one way for them to seek attention. Every few months, someone or the other leaks this information to the reporters, who seize on the opportunity to write about his.

Of course it helps that AT&T and BellSouth continue to do their dance all the time and are talking. The stocks of both companies gyrate heavily, and then a few days later when the furor ends, the AT&T stock falls, BellSouth stock rises. It is the story of a boy who cried wolf, ala in telecom terms.

A few months ago, I wrote an adjunct piece to my cover story called Gulp! For Business 2.0, which suggested that before BellSouth buys AT&T, it is more likely to gulp down Qwest Communications, because it makes more strategic sense. And then the combined company would buy AT&T. (Here is a link to the cover story.)

bq. However, before BellSouth ties the knot with AT&T, the Atlanta-based Bell should try to pick up Qwest, the fourth and weakest of the Baby Bells — another not-new idea that has kept the industry buzzing (and about which neither company would comment). The logic of combining the No. 3 and No. 4 Baby Bells is compelling. It would create impressive scale: Together, they would boast 69 million customers and combined revenues of around $38 billion. Qwest would bring along a nationwide, but underused, fiber-optic network that could easily handle BellSouth’s voice traffic.

As an aside, here is a little tid-bit!Over past ten days the trading volume of AT&T shares has fluctuated been between 5 and 13.4 million shares a day, up from a daily average trading volume of 5.5 million shares. Ditto for BellSouth shares, which saw a trading rise sharply from a daily average of about 5 million, shares a day. It is clearly a sign that this deal news has been wonderful for the traders, and Wall Street in general.

Here are links to some of the recent stories about AT&T, BellSouth marriage.

BellSouth, AT&T End Merger Talks, Disagree on Price

bq. The potential deal would have valued AT&T at about $24 a share in cash and stock, representing a 20% premium to AT&T’s current stock price. That value, however, was subject to change along with movements in the buyer’s stock price. Under the terms being proposed, BellSouth would have kept the AT&T name, which has greater national recognition than BellSouth.

From today’s Journal I found this bit quite amusing, given that this guy gets paid a lot of money for offering words of wisdom such as …….

bq. “I think AT&T eventually will get acquired,” says Dean Kartsonas, an analyst at Federated Investors, whose mutual funds invest in both AT&T and BellSouth. “It just comes down to timing.”No shit, and the day ends when the sun goes down in the west!

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