Sprint Chats Up BellSouth

In fact, some consultants and analysts view new talks between BellSouth and Sprint as little more than the usual contingency planning. Some suggest the talk points to one last ploy to help bring AT&T back to the table with BellSouth before the opportunity expires.

BellSouth was unavailable for immediate comment, and a Sprint rep declined to comment. Sprint's CEO, Gary Forsee, who took over at the No. 4 long-distance company six months ago, has emphasized in the past few weeks that he's building the business not to sell, but to compete.

Status Quo

The year opened with high expectations for consolidation among battered phone companies, whose results have been weakened by a soft economy and overwhelming competition. Some observers thought new federal pricing rules would end mandatory local wholesale pricing discounts and speed the marriage of the Bells with their long distance foes AT&T, MCI and Sprint. But the new rules largely preserved the pricing arrangements for as long as three years, taking the pairing pressure off.

In the meantime, a steady stream of cost cuts and firings helped slim the business structure and free-up cash to retire more debt. And after roughing it alone through a massive three-year downturn, some top telecom execs see a glimmer of hope and a shot at some heroics if they steer their businesses back on a prosperous course.

"Most of the managers don't want mergers," says one Wall Street analyst.

The industry has also found a common enemy on which to focus a great deal of legal and lobbyist pressure: the newly renamed MCI. The bankrupt telco is trying to distance itself from an $11 billion accounting scandal under its previous management and emerge from Chapter 11 later this year. But competitors, fearing a formidable debt-free rival, have attempted to throw obstacles in its path to redemption.