Look out! Ma Bell is putting herself back together

Like something out of a science-fiction movie, U.S. telephone giant AT&T keeps reattaching severed limbs, this time by acquiring BellSouth Corp., one of the pieces into which it was chopped in a 1984 anti-trust settlement.

The $67-billion US purchase, announced on Sunday, gives AT&T renewed strength in the southeastern United States and full ownership of Cingular Wireless, the leading U.S. mobile-phone network.

It also cements AT&T's position as the biggest U.S. phone company, a title it held a generation ago before yielding to Washington's trust-busters and carving itself into eight entities: a long-distance company and seven regional operators known as Baby Bells.

AT&T (originally called American Telephone and Telegraph) was the dominant U.S. phone company until then, loved or hated as "Ma Bell."

The deal may be good news for investors BellSouth(NYSE:BLS) traded substantially higher on Monday morning while AT&T (NYSE:SBT) was little changed but less good for employees.

AT&T plans to cut about 10,000 jobs from a combined payroll of nearly 250,000, but hopes to do so mainly by attrition, the Associated Press reported, quoting the company's chief financial officer.

In a friendlier regulatory climate, AT&T reclaimed the top spot in the industry last year when it was taken over by one of its own fragments, SBC Communications, formerly known as Southwestern Bell Corp.

The combined entity which dropped the SBC name in favour of AT&T outweighed the next-largest phone company, Verizon Communications, and the gap widened considerably with the latest deal.

Based on Friday's share prices, the AT&T-BellSouth combination had a combined stock-market value of $165 billion US compared with Verizon's $99 billion, Reuters calculated.

The deal still needs regulatory approval. New competition from cable-television networks and internet-based phone services may help AT&T make the case that it won't be able to abuse its position.