AT&T/BellSouth Merger: Make a Decision

The person who headed up the 1.1 million-employee BellSystem when it was broken up is a Virginia gentleman by the name of Charles Lee Brown. He retired to Princeton, NJ, and I once asked him why he gave up the Yellow Pages business to the Regional Bell Operating Companies. While it was “only” generating about $2 billion in revenues, the telephone directory business was incredibly profitable even before doctors and lawyers were permitted to advertise.

Mr. Brown was an AT&T man through and through. Both his parents had worked for the Bell System, and he said that the decision to go along with the divestiture was by far the most difficult he had ever been involved with. Judge Harold Greene, who was overseeing the breakup and would continue to be the decision maker for several years, had decided near the end of the process that listings belong with the people who were connecting phone lines. “If I had fought the judge on that issue,” Mr. Brown said, “it might have held up the process by months or even years. I didn't think that was fair to our employees.”

The Federal Communications Commission has no such scruples. Once again, it postponed voting on whether to approve a deal that would allow the current AT&T (Southwestern Bell/Pacific Telesis/Ameritech/SNET) to merge with BellSouth Corp. According to SNL Media & Communications Report, the new company would be valued at more than $83 billion, have nearly 70 million local phone lines in 22 states, and would generate $117 billion in revenues and employ 309,000 people.

There are political and regulatory reasons that I'm not going to get into here for why the FCC has delayed approving the merger. Ironically, one of the problems is that the Justice Department OK’d the merger with no conditions, which puts the FCC in the position of having to be the policeman in this case. The upshot is that many thousands of people are unsure of their futures. I spoke with an associate at BellSouth and asked what the impact was, and the response was predictable: Uncertainty creates fear, which in turn fosters low morale, which ultimately has an impact on customer service. Media & Communications suggests that only if the FCC commissioner (who has already recused himself because he was a lobbyist for a group that opposed the merger) votes can a deadlock be broken. On this election day, you just have to love bureaucracy.