AT&T taps into wireless market. (acquires one third of McCaw Cellular Communications Inc.)(News Analysis)(includes related article on reaction of regional Bell companies)

By Mitch Ratcliffe and Jon Swartz

New York - AT&T Co. played only one card in a carefully cultivated hand of telecommunications and computer investments when it spent $3.73 billion this month to acquire one-third of McCaw Cellular Communications Inc.

The long-distance giant bought into Kirkland, Wash.-based McCaw knowing it is the best bet for getting back into the lucrative local telephone exchange business, sources said. AT&T is not prohibited from offering local cellular service, despite the federal court decree that shattered the company's telephone service monopoly in 1984. The McCaw connection, however, will put AT&T in direct competition with several regional Bell operating companies that offer local cellular services.

"AT&T, by making this deal, is going head to head with its offspring," said Paul Zagaeski, a senior telecommunications analyst at The Yankee Group in Boston. After the 1984 breakup, Zagaeski said, AT&T looked for a new identity before settling on a return to its salad days. "For the past three years, it has been trying to reinvent itself as a full-service telecommunications company," he said.

Under the alliance, McCaw's cellular service would be marketed under AT&T's brand name in North America. McCaw offers cellular service in more than 100 U.S. cities under the CellularOne label.

AT&T Chairman Robert Allen in recent months has spoken of growth opportunities in local services, particularly cellular phones and wireless portable computers. In add tion to McCaw, AT&T has invested in EO Inc., a Mountain View, Calif.-based handheld computer maker that announced two devices with wired and cellular links to AT&T's EasyLink mail services.

"AT&T has been maneuvering behind the scenes to make wireless data services a very big thing," said Richard Shaffer, principal at Technologic Partners, a New York venture-capital company. "It realizes that the digital devices of the future will be more like telephones and televisions than a computer."