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Table: Weighing the Alternatives


BellSouth is contemplating its biggest move ever. Merger talks with both AT&T and Sprint have been held in recent weeks. Here's how the options stack up:

BUY AT&T

Pros:

AT&T (T) is a top brand. It has global voice and data networks, and it's a key provider of communications to multinational corporations and governments. After AT&T sells off its cable business, the phone business could cost $30 billion to $40 billion, say analysts.

Cons:

AT&T's consumer long-distance business is sinking. Its market share dropped to 42% this year, from more than 50% in 2000, and the division's revenues are expected to shrink by nearly 20% this year, to about $15 billion in 2001. The business also is loaded with $39.5 billion in debt.

BUY SPRINT

Pros:

Sprint (FON) has a nationwide network and strong Internet services that would help BellSouth (BLS) serve large corporate customers. It also has a small, profitable local phone business that would fit nicely with BellSouth. Sprint could go for $20 billion to $25 billion, a relative bargain, say analysts.

Cons:

Sprint's growth is slowing in every market except wireless. In October, it shut down its high-speed corporate Internet service, ION. A merger would leave the combined company much smaller than local phone rivals Verizon (VZ) and SBC (SBC) in revenues and in market cap.

DO NOTHING

Pros:

BellSouth's nine-state local phone business posts single-digit growth. Its nationwide wireless partnership with SBC, known as Cingular, is a success. With those businesses, BellSouth probably can survive as an independent--and profitable--company.

Cons:

BellSouth's main voice and data businesses are slowing, with the exception of wireless. If it doesn't do a deal, it will become a slow-growing, smaller player. That will make it difficult for the stock to continue to outperform the industry.


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