Are the Telcos in Trouble?

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

Are the Telcos in Trouble?

It seems that the big cable coalition - Comcast, Cox, Cablevision, Charter, TWC and Bright House - are set to grab 15-20% of the small business market by the end of the year. This same clutch of companies also offer Ethernet over Fiber and Broadsoft based Hosted PBX which will be used to target Mid-sized businesses and Enterprise. Their only disadvantage is the same one that RBOCs faced before consolidation - regional networks. With NNI's and other cooperation, I am certain this group will get past that hurdle in 2014.

I have to go with ZTE VP of wireless Sean Cai, "Telcos are blinded trying to resolve their many short-term issues and don't see the big picture. ... Many haven't woken up to the long-term [threats] and are still focused on dealing with old challenges."

While the ILECs try to handle pension liabilities, union woes, landline losses and spend big cash on cloud services and acquisitions, their debt is mounting. The debt is a huge problem, since it is likely tied to the stock prices. Did you see what happened to CenturyLink stock when they cut the dividend? A 22% drop. Windstream and Frontier quake in their boots over a similar reaction. Yet when the cash is needed to pay debt and build cloud, how do you pay out huge dividends too?

The big thing is that cable is taking all of the profitable customers. Those small business POTS, Centrex, T1 customers were pure gold to the ILEC. Now the big broadband bundle with voice and TV is eating away at the ILEC profits --- probably faster than they can move to another segment to replace that profit, revenue, margin, cash.

The other problem that telcos face is integration of all the acquired companies. CenturyLink (Qwest, Savvis, Embarq); AT&T (SBC, ATT, BellSouth); Level3 (Global Crossing); Windstream (Paetec, which didn't integrate Allworx, Quagga, Xeta, CavTel, MacLeod); and Frontier has indigestion from buying Verizon assets. This is causing distractions to management and sales. It is also causing churn.

BTW, who knew that ATNI had almost $760 million in annual revenue?


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