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-percent 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 companies have a combined market capitalization of $165 billion, based on Friday's closing stock prices.

The next largest telephone company, Verizon Communications which bought MCI Inc. last year, has a market capitalization 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 percent. 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 companies said.

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

Two top consumer groups asked the government to block the deal, saying it could lead to higher prices. AT&T said the deal would result in a "very competitive company," especially in wireless and video services.

AT&T, whose history dates back more than 125 years to the invention of the telephone, was broken up in 1984, with the parent controlling the long-distance assets and its seven offspring controlling regional local telephone services.

"This is essentially re-creating the old AT&T. But in this environment, the industry has been so weakened, with so many competing technologies, it's a very, very different world now," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.

"It will strengthen two companies that aren't particularly strong. The industry needs that consolidation to make them stronger against competing technologies," Ghriskey said.

As traditional landline phone businesses have been hurt by a shift to e-mail and wireless phones, telephone carriers have shifted their focus to faster growing businesses such as wireless and data services.

AT&T and other major telephone companies also have been upgrading their networks to offer subscription-television services to thwart competition from cable TV operators, which are offering phone services. AT&T in January began offering video in Texas and plans to expand service to 21 cities in its home territory this year.

A merged AT&T-BellSouth would be trailed by Verizon Communications, which last year bought MCI Inc. Qwest Communications International Inc., the final remaining Baby Bell, covers Minnesota to Washington state.

Any deal would require approval from antitrust authorities as well as the Federal Communications Commission, but analysts said they doubted there would be significant opposition.

"The deal is likely to be approved," said Blair Levin, an analyst at Stifel Nicolaus and a former Federal Communications Commission chief of staff. "The government has already given us a road map and it had very few speed bumps and much less brick walls for this kind of transaction."

He said the government would likely seek similar conditions on this transaction that were placed on the AT&T-SBC deal, which included some price controls, as well as providing competitors access to some buildings and ensuring customers have unfettered access to the Internet.

AT&T expects the deal to be neutral to earnings per share in 2007, and boost earnings per share, excluding merger costs and other items, thereafter.

Cost-savings are expected to top $2 billion in the second year after closing the deal, and total nearly $18 billion, AT&T said. The savings will come from an undisclosed amount of work force cuts, lower advertising expenses and cheaper operating costs as the companies merge operations to one network.

For Edward Whitacre, chairman and chief executive of the new AT&T, a deal would be the latest of a long line of bold acquisitions. A purchase of BellSouth by the new AT&T had been long-expected by Wall Street, but the announcement came sooner than some analysts predicted -- just three months after SBC completed the purchase of AT&T.

Whitacre, who was expected to retire around the end of this year, was asked to stay until March 2008, AT&T said. He will serve as chairman of the combined companies, while BellSouth Chairman Duane Ackerman will head BellSouth operations for a transition period following the merger, the companies said.