AT&T chief Edward E. Whitacre Jr at the firm’s headquarters in Texas on Monday. (AFP)

Philadelphia, March 6 (Reuters): AT&T Inc said on Sunday it would buy BellSouth Corp for $67 billion to acquire the rest of Cingular Wireless it does not already own, and expand into the southeastern United States to gain heft to battle growing competition from cable television and Internet companies.

Together, AT&T and BellSouth would have a coast-to-coast long-distance telephone and data network, residential customers in 22 states and business customers comprising more than half of the Fortune 1000, analysts said.

BellSouth shareholders will receive 1.325 shares of AT&T common stock for each common share of BellSouth. Based on AT&T’s closing stock price on March 3, that equals $37.09 per BellSouth common share, a 17.9-per cent premium.

The new AT&T, which was formed in November when SBC Communications Inc completed its acquisition of AT&T Corp, also said it would repurchase at least $10 billion of its common shares over the next 22 months.

The deal’s price tag, which values BellSouth at about 6.9-times Wall Street’s 2006 cash-flow forecasts, will likely weigh on AT&T’s stock price, said Stifel Nicolaus analyst Chris King.

“We believe this premium valuation ... is difficult to justify,” King said. AT&T trades at about 6.0-times cash flow, while Verizon trades at about 5.1-times cash flow.

The firms have a combined market capitalisation of $165 billion, based on Friday’s closing stock prices. The next largest telephone firm, Verizon Communications, which bought MCI Inc last year, has a market cap of $99 billion.

The deal would bring ownership of Cingular Wireless, the No. 1 U.S. wireless telephone company, under one roof, which Wall Street analysts have said would streamline management and allow one parent company to enjoy all of the financial benefits.

AT&T currently owns 60 percent of Cingular, while BellSouth owns the remaining 40 per cent. Despite its heft, Cingular has been losing market share of the most lucrative, customers to its main rival, Verizon Wireless.

At the completion of the deal, which is expected to close within a year, all the landline and wireless businesses will exist under the sole brand name of AT&T, the firms said.

A purchase of BellSouth would recombine the former “Ma Bell” with four of the seven original Baby Bells regional telephone companies.