Merger Talk Sparks Telecom Rally

Beaten-down telecom stocks rallied Thursday amid rumors that some big mergers could be in the works.

BellSouth Corp. is in talks to buy Sprint Corp., the No. 3 U.S. long-distance company, the Washington Post reported, citing unidentified sources.

The newspaper also said SBC Communications, parent of Pacific Bell and other local phone companies, has held talks to buy WorldCom, the No. 2 U.S. long-distance firm. SBC is said to be interested in WorldCom’s global Internet network.

The companies might believe they are more likely to win regulatory approval for such mega-mergers under the Bush administration, which is expected to be less hostile to big deals than its predecessor, the Post said.

Still, analysts have argued that transactions such as those described by the Post are unlikely until local phone carriers get permission from the Federal Communications Commission to sell long-distance or transmit data in more states.

So far, SBC has been approved to sell long-distance service in Oklahoma, Kansas and Texas only.

Stocks of the rumored targets rose Thursday, though the gains were limited. Sprint (ticker symbol: FON) jumped $1.14 to $21.70. The stock has fallen from a 52-week high of $67.

WorldCom (WCOM) rose $1.13 to $17.56. It was as high as $49.94 over the last year.

Earlier this week, San Antonio-based SBC said it isn’t planning to make an acquisition. “I can’t remember the last time we had a senior-management meeting on an acquisition,” Chief Executive Edward Whitacre said Tuesday at an investor conference in New York.

Officials at WorldCom weren’t available to comment, and BellSouth and Sprint spokesmen declined to comment.

FCC Chairman Michael Powell also declined to comment. “I can’t tell whether it’s real or not,” he said at a conference in Washington, D.C. But “I’ll always have an open mind,” he added.

BellSouth offered more than $100 billion for Sprint 17 months ago, the Post said. That was topped by WorldCom’s $129-billion bid, which regulators then blocked, the report said.

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Phone Stocks Get a Ring

Major telecommunications shares generally enjoyed a rally Thursday amid rumors that some mega-mergers could be in the works. Given the plunge in most tech and telecom stocks over the last year, takeovers of most phone companies--especially long-distance and wireless firms--would cost acquirers far less now than a year ago.

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Ticker 52-week Thurs. Thurs. Stock symbol high close change AT&T; T $61.00 $23.35 +$0.93 AT&T; Wireless AWE 36.00 18.90 +0.65 BellSouth BLS 53.50 40.50 --0.15 Global Crossing GX 57.94 15.30 +0.86 Nextel Commun. NXTL 82.81 13.75 --0.88 SBC Commun. SBC 59.00 42.82 +0.71 Sprint FON 67.00 21.70 +1.14 Sprint PCS PCS 66.94 19.51 +0.61 Qwest Commun. Q 66.87 37.92 +2.48 Verizon Commun. VZ 66.00 48.05 +1.15 WorldCom WCOM 49.94 17.56 +1.13

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Sources: Reuters, Times research