Leading US telecoms firm AT&T has agreed to buy smaller rival BellSouth in a deal worth $67bn (£38.2bn).
The takeover will 'reunite' AT&T with BellSouth
Under the deal, AT&T will gain full ownership of Cingular Wireless, America's biggest mobile phone firm.
The takeover will create a new giant in the US telecoms sector, with a market capitalization of $165bn.
It will also see BellSouth returning to its old stable. It and several other operators - dubbed the Baby Bells - were spun off from AT&T in the 1980s.
Back to the future
"This is essentially re-creating the old AT&T," said Tim Ghriskey, chief investment officer of New-York based Solaris Asset Management.
"It will strengthen two companies that aren't particularly strong. The industry needs that consolidation to make them stronger against competing technologies."
The potential profit makes the US phone market very competitive
A combined AT&T and BellSouth will have operations in 22 US states.
The deal will consolidate ownership of Cingular Wireless, whose main US mobile phone rival - Verizon Wireless - is part-owned by Britain's Vodafone.
AT&T currently owns 60% of Cingular Wireless, while BellSouth owns the remaining 40%.
Analysts expect Cingular to be rebranded under the AT&T name once the deal has been closed.
The takeover will also enable the new AT&T, which was itself taken over by former Baby Bell SBC Communications in November last year, to extend its reach in the south east of the United States.
AT&T's takeover over BellSouth marks the latest upheaval in America's fiercely competitive telecoms market.
Verizon Wireless parent company Verizon Communications last year snapped up operator MCI - formerly the bankrupt telecoms giant Worldcom - following a drawn-out bid battle with rival Qwest.
Traditional telecoms operators have also been feeling the heat from firms offering cable and internet telephony services.
Under the AT&T deal, which has yet to be approved by regulators, BellSouth shareholders will receive 1.325 shares of AT&T common stock for each common share in BellSouth.