Neither company would comment yesterday. But the industry was already struggling to come to terms with the possibility of a merged AT&T-SBC which would have combined annual revenues of $80bn and a huge 60 per cent of the US long-dstance market.
At $50bn it would be the biggest corporate combination in history, dwarfing, for instance, even the $27bn merger between Sandoz and Ciba Geigy to create drug giant Novartis. Even though a deal would face myriad regulatory, hurdles, observers of the industry were not overwhelmingly surprised by it.
Noting that consolidation is ongoing in the sector, Peter Huber of the Manhattan Instititue commented: "We are going to see more of this. Whether or not this particular deal goes through, this is the direction of the industry." Among combinations already under way is the current splicing of BT with America's MCI and the joining of Nynex with Bell Atlantic.
A marriage to the Texas-based SBC would, however, assuredly distract AT&T from exploring any other avenues for consolidation. Among other companies already in potential merger talks with AT&T is Britain's Cable & Wireless.
A deal would cast AT&T as the Humpty Dumpty of telecommunications. In 1984, the old American Telephone & Telegraph Co was forced to break itself and spin off what have since been the regional baby bells. Now it has the chance to partially reassemble itself.
SBC offers special attractions for AT&T. It is the local service carrier in seven of the ten biggest US cities and is concentrated in the fast- growing regions of the south-west, including all of Texas, and the West Coast states including California.
How close a deal might be is unclear. Negotiators must agree on the type of deal, where the new company would be based, what name it would have and who would run it. Interestingly, SBC is deemed to have the more dynamic and youthful management team that could be tapped to run the new giant.