SBC Chairman and CEO Edward Whitacre clearly lives by the motto, "Make no small plans." For while the $16 billion acquisition of AT&T is not his company's largest, Whitacre admits it may be among its most important.

The SBC executive and AT&T CEO David Dorman made it clear that they believe they have created the prototype for future telecommunications providers in a company that has all the assets required to deliver a wide range of IP-based services to all markets--business and consumer, global and domestic, wireline and wireless.

In the process, Whitacre believes he is helping save the company that launched his career, and protect the brand name most associated with the U.S. telecom market.

"We are assuring that a U.S.-based firm will serve as a global leader in networking and telecommunications," said Whitacre. "Some will write this merger off as some kind of bad news for AT&T, nothing could be further from the truth. This will ensure that the company that started it all more than 100 years ago will be part of it for years to come."

For that promise, and the many others made in announcing the merger, to come true, however, there are still hurdles to be overcome. They include:

Meeting financial goals: SBC Chief Operating Officer Randall Stephenson stressed the $15 billion in synergies between the two companies--essentially outlining where costs could be cut by combining sales organizations, IT groups, purchasing operations and headquarters. Achieving those savings is essential to the merger, especially since both sides admit that AT&T's revenues will continue to decline.

In reality, however, such synergies "are usually exaggerated in announcing a merger agreement," said Yankee Group analyst Sean Hackett. "The biggest challenges--and the ones most often overlooked--are not the technology issues, but the cultural issues." Integrating the two organizations will be a significant challenge, he says.

More than likely, SBC personnel will dominate the company going forward, says analyst Danny Briere of TeleChoice, although AT&T business sales and support staff are likely to be retained. "I don't think they are going to waste a lot of effort worrying about how people feel about their jobs," he said. Regulation: Federal regulators are not expected to pose many hurdles, but by Whitacre's estimate, 26 to 28 state regulatory bodies must approve the merger, which will diminish competition in the long-distance business within their states. Many analysts believe the approval process will be time-consuming, but no one is seeing this as a deal breaker. It could become another profit drain, however. According to Legg Mason's Washington telecom regulatory team, the SBC-AT&T combination "would have a good chance of eventually gaining antitrust/regulatory clearance, but could be subjected to significant divestitures, particularly in SBC's region, that complicate matters and drag the process out for 12 to 18 months."

Customer opposition: AT&T's primary value to SBC is its 3 million business customers. Analyst Hackett says the roughly $5400 per customer acquisition cost is a reasonable one--if SBC can hang on to those customers during and after the merger. "The ability to hold on to those and grow that base is going to present a sizeable challenge," says Hackett. BellSouth and Verizon would be smart to "focus on a set of value-added services they can deliver" especially during the merger period.

SBC is likely to hang on to "customer-facing personnel," adds Briere, to keep the business customers happy.

A number of analysts have pointed out, however, that large business customers were among the most vocal critics of the failed Sprint-Worldcom deal, because of diminished competition, and could weigh in here as well.

Industry reshaping: This is not so much a hurdle as an outcome of the SBC-AT&T deal that could bounce back to affect today's announcement. Many believe that BellSouth and Verizon will now be looking for similar mergers, perhaps putting MCI and Sprint into play. Information Gatekeepers analyst Clif Holliday predicted that AT&T would be acquired this year--although he favored BellSouth as its purchaser--and now expects both MCI and Sprint to find suitors as the long-distance business continues to diminish.

"At a certain point, MCI has to put powder on their face and their perfume on," agrees analyst Briere. "AT&T did not have a future before this. It's time to get out under any conditions. If MCI can convince someone to pick them up, they can get picked up just as fast."

If the SBC-AT&T deal leads to a major industry restructuring, chances are it will come under more scrutiny as Congress tries to determine how to rewrite the telecom rulebook, something that was expected to begin happening this year anyway.