A fund combining Ma Bell's new brood: how good?

By , Business correspondent of The Christian Science Monitor

For some 3 million AT&T stockholders, the end is near. The official ''breakup'' of the American Telephone & Telegraph Company is only a few months away - New Year's Day, to be exact.

After that date, AT&T shareholders will be given one new share in each of the seven new regional phone companies for every 10 shares they now hold. These will be added to the 10 shares they will still own in the then-independent parent. The total package of shares is expected to be valued by the market at about the same amount as before the breakup - at least at first.

Then, stockholders can hold shares in both the parent company and the regional companies, or they can sell their shares in any companies that are not doing well.

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Or, before the end of the year, they can sell their AT&T stock, sit on the sidelines until the strongest of the eight new pieces emerge, and invest in those companies later.

Now, a third option has been introduced by four major brokerages, led by Merrill Lynch, Pierce, Fenner & Smith Inc. The option, called the Equity Income Fund, is a unit trust, similar to a mutual fund. To receive one share of the new fund, the investor will trade in one share of his AT&T stock. This way, Merrill Lynch says, the stockholder can ''keep the phone company together'' by having a portfolio of eight stocks representing the same pieces that existed before the breakup.

Joining Merrill Lynch in offering the trust are Dean Witter Reynolds Inc., Prudential-Bache Securities Inc., and Shearson/American Express Inc.

For a time, a Merrill Lynch spokesman says, the fund will not be managed, that is, if the original parent company or one of the new regional companies starts to perform badly, it will not be sold out of the portfolio.

There are several advantages of the ''phone fund,'' Merrill Lynch says, including:

* The investor will own all eight of the current Bell System companies in the same 1-for-10 proportion of the reorganization.

* All or some of the fund units can be sold without paying a brokerage commission or odd-lot penalty. Shares can be sold through a secondary market maintained by the four sponsors.

* You do not have to keep track of stock certificates and quarterly dividend payments from eight different companies (32 checks in all), each paying different-size dividends at different times. You will receive one single monthly check representing the entire portfolio, or you can have the dividends reinvested.

''I think it's very good for anybody that wants to maintain the same ownership they now have,'' Jack W. Swensen, an investment counselor in Weston, Mass., said of the fund.

Investors who do not want to maintain equal ownership of all eight pieces, however, or who suspect the package will not perform as well as the original whole, will probably avoid this fund.

So here are the three choices: Take the shares offered by AT&T; sell out before Jan. 1 and join the many investors who are trying to figure out which parts will do better and then reinvesting accordingly; or take the Merrill Lynch offer, which involves a commission, in effect, of 1.5 percent.

If you take the AT&T offer, you will have to deal with a lot more paper work. There will be all those stock certificates, and all those dividend checks to handle. You will then have to follow eight separate companies and their stocks. If you sell out before Jan. 1 and buy back what you hope are the best-looking pieces later, you will have to do more research and pay more brokerage commissions.

''It's a bookkeeping thing. That's the main advantage of it (the Merrill Lynch trust),'' says Edward Lubinski, senior investment analyst at Investors Diversified Services, the Minneapolis-based mutual fund. If he had 100 shares of AT&T stock, Mr. Lubinski says, he would take the exchange offered by the phone company. ''I wouldn't mind handling the paper work,'' he adds.

For investors who sell their AT&T stock, there will be an opportunity to buy back their favorite pieces before the end of the year. Sometime before Jan. 1, all eight separate pieces will begin trading on a when-issued basis (that is, no stock will actually be exchanged before Jan. 1), and that will quickly give investors a chance to see what the marketplace thinks of each of them.

The market's opinion will be affected by several factors: Of the seven new regional phone companies, some have chosen a highly centralized management; others have decided on a more diversified management. Some have decided to stay with their former parent as a major supplier; others have already begun looking at other suppliers not related to Ma Bell. And the regulatory climates faced by the regional phone companies in different states are apt to vary widely, permitting the companies differing profit levels.

Because it will start out as an unmanaged fund, the Merrill Lynch program will not be able to take these variables into account. If one or more regional phone stocks begin to perform badly, these poor performers could be a drag on the fund's asset value.

In the future, it is possible the fund will be more closely managed, and the laggards among the stocks can be reduced. It is also possible the variable circumstances mentioned earlier may just work in the fund's favor, making it as steady a performer as the old AT&T stock and thus possibly a good investment. Next year you will be able to buy into the fund with cash, instead of having to trade a share of AT&T stock as you do now.

But a good-performing fund under these circumstances is not yet a sure thing. So, for investors who don't mind some extra juggling and would like to take their chances on picking the best of the new phone stocks, the stock distribution plan announced by AT&T last December still makes the most sense.

If you would like a question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.

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