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Papa Bell Sure Seems Certain


By Maria Bartiromo Ed Whitacre was already known as a wheeler-dealer on Wall Street before he announced AT&T's (T) $67 billion merger with BellSouth (BLS). And with good reason. He has been driving telecom consolidation for a decade, spending billions to piece together Ameritech, Pacific Telesis, and Southern New England Telecommunications. Just last year his renamed SBC Communications bought AT&T. Whitacre was set to retire in 2006 but will stay on until 2008 to lead the proposed AT&T-BellSouth colossus. I talked with him on the day the deal was disclosed.

This deal seems like a defensive move -- bulking up to battle the cable companies. Is that a fair assessment?

The world is changing rapidly, and we need a bigger footprint to be competitive. [Cable] is a very big competitor, and if you look at broadband, we are neck and neck. They are taking a lot of lines from us, and we need a counterstrategy. So from that standpoint, sure, you could say it's a defensive maneuver.

How did it happen? One report said you were duck hunting?

It happened over a long time. Mr. Ackerman [F. Duane Ackerman, CEO of BellSouth] and I are friends. We chatted from time to time, and a few months ago we just decided this was the time...to get the companies together. We didn't go duck hunting. There was no hunting involved. There was a meeting.

The last time we saw companies in your business spending billions to expand, the demand wasn't there, and the sector blew up.

There is demand to put wireline and wireless together. There is a huge demand. Who knows where the end is right now? What we will be able to do under just one brand is offer the consumers what they want. It doesn't matter if it's wireless service, video, or broadband. We can bundle them together. It's good news for the consumers because when you bundle, they get a better price.

Some people think prices will go up.

I don't think so. No way.

Are you worried about a regulatory roadblock?

You always worry, but...we are not taking a competitor out of the market. We're not putting the Bell System back together.

Do you expect more resistance than to the SBC-AT&T deal, given the concerns about efforts to charge tolls on the Internet?

That's ridiculous. We have said publicly and to the SEC, nothing on the Internet changes. If we want to build more capacity that people use, then they should pay for it. This is a false issue. Consumers will benefit.

How do you plan to approach the BellSouth partnership with DirecTV (DTV)?

AT&T has a partnership with DISH Network. For the next year, BellSouth will continue with DirecTV, and we will continue with Echostar (DISH). [Then] we will have to figure it out.

Would it make sense for AT&T to eventually acquire Echostar?

I won't comment on that.

Let's talk price. Did you overpay?

I don't think so. It's in the range of premiums being paid for big deals...in line with the P&G deal [Procter & Gamble paid $54.3 billion for Gillette last October].

Some people were surprised at your timing, because you have a lot to digest. You are still integrating SBC and AT&T and, some might say, Cingular and AT&T Wireless.

Cingular is run by separate management, so no integration issue there. BellSouth is a telephone company, and we are a telephone company...we know the phone business. I don't think there will be any integration issues at all.

You became CEO of the former Southwestern Bell, the smallest of the Baby Bells, in 1990 and have been a driving force behind a wave of consolidation in the telecom sector. Are you done now?

We have our plate full and a good strategy that we will execute well. We will be in the wireless business, the Internet TV business...we've covered the waterfront.

Maria Bartiromo is the host of CNBC's Closing Bell


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