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AT&T-BellSouth Merger Proposed

Shares of the U.S. regional telephone firm BellSouth rose sharply in value Monday after the company agreed to an acquisition offer by AT&T Inc.

The deal, valued at $67 billion, was announced over the weekend. It would create a communications giant with more than $120 billion in annual revenue. But as VOA's George Dwyer reports, the size of the proposed merger has some consumer groups worried.

AT&T was a legal monopoly until 1984, when the U.S. government ordered it divided into seven regional companies and a single long-distance carrier. The idea then was to promote competition but now the firm has announced plans to reacquire one of its spun-off "regionals" - BellSouth of Alabama.

BellSouth's President, Tom Hamby, says the move will benefit consumers. "First of all, it will take probably nine to twelve months before the merger is consummated, but I think what customers will really share in is the great innovation, new services, more competition. I think those are the real benefits to customers in Alabama."

The reason the government may now be willing to let the deal go forward is that the development of wireless phone service and the Internet, along with a growing demand for multi-media products delivered over broadband cable, have fundamentally changed the business of commercial telecommunications in recent years.

Mr. Hamby says the competition with more with cable companies. "Today we don't compete head to head with AT&T, however we compete with major cable companies and that is really what this is all about; our industry getting more into the video business and they're interested into getting in the telecom business and that's where you'll see the economies of scope come into play and the competition heat up."

Industry analysts, like Tom Watts, say the deal makes sense. "Big is better. Smaller operators, their costs just aren't competitive and they haven't been able to bring prices down as competition has increased."

But some consumer advocates have already expressed concern that the merger could lead to higher rates if AT&T is again allowed control over such a large segment of the U.S. telecommunications terrain.

Gene Kimmelman, with the group Consumer's Union, says competition will be lost. "We're losing a lot of that aggressive competition that drove cell phone prices down and I think the days in which those prices keep falling through the floor are probably gone."

Some jobs will go as well -- as many as 10,000. Federal regulators must approve the deal. If it does go ahead, some analysts say it might spur AT&T's remaining competitors to join forces so they too will be big enough to compete.