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AT&T, BT eyeing merger?
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August 18, 2000: 10:27 a.m. ET
Report: Transatlantic allies in joint venture said to consider a full tie-up
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LONDON (CNNfn) - AT&T Corp. and British Telecommunications PLC reportedly have held exploratory talks about a merger, in what would build upon the existing alliance of the old-line telephone companies and create a transatlantic telecommunications behemoth valued at about $185 billion (202 billion euros).
At this stage, however, the two allies have not begun formal talks nor have the companies involved their board members or outside investment bankers, the Wall Street Journal reported Friday. A deal would cement the tie between the one-time monopolies around their Concert joint venture, which offers telecom services to big corporate clients.
However, there would likely be administrative hassles in uniting two such large companies, which would together comprise more than 250,000 workers, according to 1999 data. And a merger would likely draw scrutiny of U.S. and European regulators, who have been known to take a tough line on telecom sector deals because of the potential impact on consumers' pocketbooks.
But a deal could also allow for big cost savings by letting the companies eliminate redundancies in their administrative and customer service activities.
That could inject a needed jolt to the stock prices of both companies, which have been languishing recently as rivals chip away at their dominance.
"It represents a defensive move on the part of both companies," said Chris Doyle of consulting firm Charles River Associates. "I think BT feels it's been threatened by a number of other companies in Europe and notably Vodafone AirTouch," he said, referring to the U.K.-based mobile phone leader.
The Journal said the idea for such a deal stems from the need at the companies to bolster their shares. 
A BT spokesperson could not be reached for immediate comment.
AT&T, which has been seeing profit margins in its core long-distance business shrink amid stiff competition, has been making its bet on offering high-speed communications services via cable lines. Last year, AT&T carried out a flurry of deals that made it the largest U.S. cable company - in addition to its position as the nation's biggest long-distance provider.
"AT&T has lost its way a little bit in the international market although it has a very strong brand," said Doyle. "It's finding a way to build and strengthen that brand through collaboration and perhaps eventual takeover of a company like BT."
BT, for its part, would tie its fortunes to the U.S. market after its abortive attempt to merge with AT&T's U.S. rival MCI Communications Corp., which eventually merged with network operator WorldCom Inc.
Shares of AT&T (T: Research, Estimates) slipped 1/4 to 32 on the New York Stock Exchange early Friday, while BT (BT-A) shares fell 25 pence, or 2.5 percent, to 832 pence on the London Stock Exchange. 
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