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
, 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
-- 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
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.
With that in mind, Whitacre indicated that SBC is drafting its own version of the Telecom Act in hopes of taking advantage of Washington's more business-friendly atmosphere. With Republicans more fully in control of Congress and President Bush having won re-election, the company wants to make a case for a regulatory setup mirroring the one used in the cable TV industry, observers say.
Meanwhile, SBC rolled out plans to offer residential voice over Internet protocol, or voice-over-Internet, service next year. The company said the service is under trial now in Los Angeles, Dallas, Chicago and San Antonio. The service will use Internet protocol technology and digital subscriber line, or DSL, Internet connections.
SBC said the service will enable it to deliver not only voice calling but also other enhanced features, such as a Web-based portal and advanced call- management capabilities that make it easier for customers to manage their communications.
VoIP hype has swept the telecom industry in the past year, as more and more companies offer plans for providing the service. In reality, VoIP accounts for only a tiny slice of telephone use, and investors are interested in the technology in part because it promises to accelerate a trend the telcos aren't happy about in the first place: price erosion.
Indeed, the Bells have been the high-cost producers in a falling-price environment, a position that has caused some concern among their followers. Those worries are likely to increase as the telcos confront their cable rivals in offering advanced digital services such as video.
Still, on Tuesday, Whitacre was optimistic, saying he expects VoIP and other technological shifts to help the company. Looking at SBC's offerings, he said he sees a "business with top-line growth and margin improvement."
"Our margins have been improving," he added in response to a question about burgeoning competition. "Not as much as we'd like, but they are improving."