NEW YORK, Dec. 29 (UPI) -- U.S. stock indexes fell in the year's final day of trading Friday, but the Dow Jones industrial average still finished its best year since 2003.

The Dow dropped 38.37 points to 12,463.15, but gained 16 percent over the year, its greatest yearly gain in three years.

On the New York Stock Exchange, 1,274 stocks advanced and 2,059 declined on a volume of 1.7 million shares.

The Standard & Poor's 500-stock index, up 14 percent in 2006, slipped 6.45 to 1418.28 Friday. The Nasdaq Composite Index, up 9.5 percent this year, slid 10.28 to 2415.29 on the day.

Regular trading resumes Wednesday. Most U.S. exchanges will be closed Monday for New Year's Day and Tuesday to observe the death of former U.S. President Gerald Ford.

The 10-year Treasury note fell 3/32, or 94 cents per each $1,000 invested, to yield 4.708 percent. The 30-year note gained 3/32, yielding 4.812 percent.

The euro traded at $1.3197 from $1.3146 Thursday. The dollar was at 119.03 yen from 118.91 yen late Thursday.

In London, the FTSE 100 index closed 0.3 percent lower at 6,220.80.

Japan's benchmark Nikkei 225 stock index closed up 0.01 percent to finish at 17,225.83 -- the Nikkei's highest close since May 9.

AT&T wins OK for $85B BellSouth deal

WASHINGTON, Dec. 29 (UPI) -- AT&T Inc. Friday won U.S. approval to complete an $85 billion takeover of BellSouth Corp. after it made a series of consumer-friendly concessions.

The Federal Communications Commission unanimously approved the deal, the largest ever in U.S. telecommunications history, saying "significant public interest benefits are likely to result from this transaction."

The merger creates a $220 billion company that will serve more than 70 million local phone customers in 22 states, as well as 10 million broadband users, The Wall Street Journal reported.

AT&T's concessions included an agreement to offer high-speed DSL Internet service to residential customers for $19.95 a month and cap prices on high-volume data lines used by business customers.

It also agreed to observe numerous "network neutrality" principles so it would treat all Internet content equally -- and not give priority to providers such as Google Inc. (NASDAQ:GOOG) at the expense of others.

AT&T will also take over cell phone operator Cingular Wireless, which has been a joint AT&T-BellSouth venture. AT&T has said it would phase out the Cingular brand next year and replace it with the AT&T name.

Italian government seeks Alitalia buyers

MILAN, Italy, Dec. 29 (UPI) -- The Italian government Friday invited bids to purchase as much as 49.9 percent of ailing Alitalia, the country's flagship carrier.

Italy's Economy Ministry said potential buyers would have to bid for 30.1 percent to 49.9 percent of the company, with a stipulation the winning buyer or buyers would then bid for the whole company.

The bidding ends Jan. 29, the ministry said in a statement on its Web site.

Alitalia shares closed Friday on the Milan Stock Exchange at $1.39, up 8 cents, or 6.15 percent.

Alitalia, which has not made an operating profit since 1998, expects to lose more than $250 billion this year.

Air France-KLM, Europe's biggest airline, has said it has had talks with Alitalia that could evolve into formal discussions and a takeover. But it said the Italian carrier must first be privately owned, have an improved financial position and agree with the French-Dutch carrier on a business strategy.

The Italian government owns 49.9 percent of Alitalia and has agreed to cede management control.

Meridiana, Italy's third largest airline, also emerged as a potential buyer this week.

N.Y. firm buys Boston's Hancock tower

BOSTON, Dec. 29 (UPI) -- A New York real estate firm has bought Boston's iconic John Hancock tower for about $1.3 billion.

The purchase of the 60-story, 790-foot, sleek blue glass building by Broadway Real Estate Partners from Boston's Beacon Capital Partner was part of a $3.3 billion deal that also included nine other properties across the country, the Boston Globe reported Friday.

The properties include the Citigroup Center in Los Angeles, the Bank One Tower in Denver and 2445 M Street in Washington, D.C.

The Hancock tower was designed by famed architect I.M. Pei and completed in 1976. It is the 43rd tallest building in the United States and the 112th tallest building in the world.

Beacon Capital bought Boston's Hancock complex for about $910 million in 2003, the Globe said.