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Reunited and it feels so good

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AT&T's proposed $67 billion acquisition of BellSouth Corp., announced last week, will not reconstitute the old Ma Bell, which was split up in a court-ordered divestiture in 1984. ¶ It is true the merger, which must be approved by regulators, would significantly expand San Antonio-based AT&T, already the largest phone company in the country. AT&T will extend its local phone service into an additional 22 states and, much more strategically, gain full control of Cingular Wireless, a joint venture between AT&T and BellSouth. The merged company will have 70.9 million local lines, 54 million cell phone accounts and 9.9 million broadband Internet customers.

But the telecommunications industry is far different-faster-paced, more competitive and more innovative-than in 1984. For one thing, the number of local phone land lines has declined in recent years, as customers opt for wireless devices. In 1996, the number of new cell phone accounts worldwide (54 million) exceeded for the first time the number of new fixed-line accounts (50 million). In smaller numbers, people are employing voice over Internet protocol (VoIP) to conduct voice calls over their existing broadband Internet connections.

Facing stiff competition from wireless, cable and Internet service providers, the original seven "Baby Bells" started buying each other in the 1990s, starting with the pairing of NYNEX and Bell Atlantic in 1997 to form Verizon. Last year, AT&T, which had already merged with Baby Bells Pacific Telesis and Ameritech, was itself bought by SBC Communications (the former Southwestern Bell).

These reunions have had many interesting branding outcomes, notably SBC's decision to keep the AT&T name. In addition, as Alice Z. Cuneo's story on page 4 notes, analysts expect Cingular Wireless will be renamed AT&T Wireless. This, after AT&T spent half a billion dollars in 2004 to eliminate the AT&T Wireless name after it sold the business to Cingular. Beyond these branding turnabouts, the larger point is that AT&T is positioning itself to compete in new markets, such as home entertainment and broadband wireless services.

Last week's merger news had special resonance for me. A year after the break-up of AT&T in 1984, I joined Telephony, the venerable trade title for the telecom industry, as an editor.

I called Carol Wilson, my colleague at Telephony in those days (she returned in 2004 as editor at large) to see what she made of the merger from a branding perspective.

"BellSouth has a good reputation in its region. ... They tend to rank at the top end in terms of business services," Wilson said. BellSouth is also the last remaining of the original brands. "All the others disappeared a long time ago," she said, adding it is a very strong brand in its region. Nevertheless, Wilson doubted AT&T would hesitate to rebrand the company, which it has done successfully in its previous acquisitions.

When Sprint debuted its "Pin-Drop Quality" ads in 1986 to herald the start of its long distance services, I remember thinking how the pin-drop metaphor, which has since become a signature of the company, so elegantly summed up its value proposition that its fiber optic network meant sound clarity. From a creative standpoint, nothing remotely comparable had emerged from the century-old Bell System monopoly.

AT&T has two immediate marketing tasks, one tactical and one strategic. It must accomplish the BellSouth rebranding (and, likely, the Cingular rebranding). The far larger task will be how it positions itself for next-generation services. For this old Telephony editor, that will be interesting to watch.

Ellis Booker is editor of BtoB and Media Business, and can be reached at ebooker@crain.com.

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