SBC Chief Chafes at Red Tape

SBC (SBC Quote) yearns to break free of the telecom industry's regulatory gridlock.

Answering a question at a conference in Manhattan on Tuesday, CEO Ed Whitacre spoke almost wistfully of doing an oft-rumored big deal. But the executive said the current oversight regime makes big mergers almost impossible to carry out.

Asked at the UBS ninth annual Global Communications Conference if SBC would consider merging with BellSouth (BLS Quote), Whitacre said, "It does make sense to do that, but I don't believe it would get done."

Talk of mergers involving all the big players in telecom -- from SBC and BellSouth to AT&T (T Quote) and MCI (MCIP Quote) -- has been rife ever since the industry suffered its turn-of-the-century meltdown. In fact, BellSouth has been an active participant in deal talks, having broken off discussions with AT&T last year over pricing terms. Meanwhile, Atlanta-based BellSouth and San Antonio, Texas-based SBC have been as much partners as rivals in the last few years, joining up to create the Cingular cell-phone joint venture as well as a big yellow pages business.

That said, there have been many more rumors than actual deals. And Whitacre indicated there would be many hurdles to clear in a potential BellSouth-SBC tie-up. There are good reasons to join the companies, Whitacre added, but trying to do so could easily become a "regulatory morass."

On Tuesday, SBC slipped 18 cents to $26.20, and BellSouth dropped 24 cents to $27.92.

Beyond the possible objections of state and federal regulators, the executive said, there is the question of how the market would receive the deal. While investors would surely see advantages in combining the two Baby Bells, Whitacre believes it's likely that the questions about possible regulatory intervention would become a troublesome overhang for the stock.