AT&T;, SBC Call Off Their Merger Talks

Phone giants AT&T; Corp. and SBC Communications Inc. have suspended their merger talks, dealing an apparently fatal blow to what would have been the largest corporate merger in history, sources close to the companies said Friday.

The $50-billion deal--which neither company has ever publicly acknowledged--was beset by unusually sharp criticism from Washington regulators and complaints from others that AT&T; was trying to reestablish its dominion over local and long-distance service, more than a decade after being broken up by federal decree.

Official consideration of such a deal probably would have dragged on for years.

SBC, based in San Antonio, is the largest of the Baby Bells created by the AT&T; breakup. It holds a virtual monopoly on local service throughout much of the Southwestern and Western United States, in the latter region as a result of its recent merger with Pacific Telesis Group.

AT&T; holds about 60% of the long-distance business.

Merger talks between the companies began to stall last week, the sources said.

“It is accurate to say they are suspended,” said an SBC source, speaking on condition of anonymity.

SBC’s board met Friday, but spokesman Larry Soloman declined to comment on any action taken, other than the routine approval of the firm’s quarterly stock dividend.

AT&T; also had no official comment. However, one executive characterized the discussions as “dead.”

Last year’s overhaul of telecommunications laws was designed to spur competition in the media and phone industries, but it has largely resulted in mergers that critics say are negating Congress’ intent.

Because it presupposed a huge market presence, a marriage of AT&T; and SBC appeared unlikely to fly in Washington.

In a blunt assessment of the proposed deal last week, Federal Communications Commission Chairman Reed Hundt, the nation’s top phone regulator, called such a union “unthinkable.”

Hundt was replying directly to AT&T; chief Robert Allen’s earlier suggestion that a merger of AT&T; and a Baby Bell was not “unthinkable” in a deregulated environment. Allen did not specifically identify SBC as a partner for AT&T.;

Also last week, Sens. Mike DeWine (R-Ohio) and Herbert Kohl (D-Wis.), the ranking members of the Senate antitrust subcommittee, urged Hundt and the Justice Department to “scrutinize closely” mergers such as AT&T-SBC;, a clear sign of opposition from Capitol Hill.