SBC/AT&T Expert Commentary (Part 3)

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Greg Galitzine

SBC/AT&T Expert Commentary (Part 3)

Richard Kuehn is president of RAK Associates, a telecom consulting firm in Cleveland, OH, and is also a founder of the Society of Telecommunications Consultants.

Here is his take on the SBC/AT&T situation.

Someday we will have one big monopoly telephone company!! This is certainly a benefit to SBC in two ways. First, they immediately find themselves with a major international network (something they needed badly) and their own domestic network. Second, they gain access to the major business customers which was proving, particularly out of territory, to be difficult.

There are a number of customer issues. Will the ATT Contract or “deal” people remain at the new company? If not the purchase is money wasted as SBC is such a neophyte in doing negotiated contracts that their efforts tend to turn off the large business market they are trying to secure. SBC is obviously in the consumer market—a market that ATT recently said they are leaving. What will happen to that market during the expected 18 month approval process? SBC entered the market with the target of initially buying market share through aggressive pricing. Will the merged company move toward the SBC rate structure or attempt to adopt the higher ATT pricing? To me that genie is out of the bottle and to move pricing up for old, or even new, SBC customers will be difficult.

The implications to the rest of the industry are also interesting. MCI is probably close to being history with either Verizon or Bell South making that acquisition. This probably increases MCI’s shareholder value. However, this may mean the Sprint/Nextel merger may no longer look so good. Given their wireless size I doubt that either BellSouth with a 40% ownership of Cingular; or, Verizon with their wireless market share could purchase Sprint/Nextel without creating serious anti-trust questions. This could leave Sprint an orphan.

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