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SBC Might Buy AT&T
ChipGuy writes "SBC is in talks to buy AT&T according to Wall Street Journal and New York Times, both reporting price tag to be between $15-and-$16 billion. The news comes close on heels of SBC reported weaker earnings and 7000 job cuts. The New York Times says talks are fluid and sensitive. Wall Street Journal says, "a major acquisition would speak to SBC Chief Executive Edward Whitacre Jr.'s aim of turning the company into a national brand and his desire to do at least one final deal before he retires." Om Malik writes that "buying AT&T will make sense for anyone, and not just SBC. Why? Because AT&T still is the only game in the enterprise markets. MCI is hurting and Sprint clearly wants to focus on wireless. That leaves AT&T in a pretty good shape.""
I wonder if this is just a sign to come. With things like the internet (skype?) hurting the traditional phone companie's revenue streams, and with the slow but steady emergence of VoIP, the big phone companies days are numbered. They will still have a purpose, of course, but they'll have to learn to be more competitive in a more competitive industry.
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Sounds like everyone wants to play...
Before we get into it about rebuilding the hated Ma Bell of yesteryear, keep this in perspective. SBC is right now one of the four remaining RBOCs, or Baby Bells, formed from the divestiture of AT&T (the original national phone monopoly) in 1984. The RBOCs already provide national long distance service (opened to them following the Telecommunications Act of 1996). AT&T is mostly a pure long distance and data network (WAN) player these days. The Bells have to have network-sharing agreements to provide national LD service. Qwest has an extensive fiber LD network though. So this potential acquisition would add a national long distance and data network to an incumbent local service provider and give it a huge presence in the enterprise market. It would not create a new national phone monopoly or be the Son of Ma Bell. They would be a formidable competitor though.
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Anyhow, the telecommunications industry has changed dramatically since the breakup of AT&T, and the rationale for the breakup no longer exists. These days, cell phones are prevalent; competitors easily enter the market for cell phones, which can be used for local and long-distance calls. A re-united AT&T (SBC + Pacbell, which was purchases by SBC, + AT&T + Lucent, which includes Bell Labs) would not pose a monopolistic threat. Heck, a re-united AT&T would be no more monopolistic than Micro$oft.
Note that even the Internet poses additional competition in the telecommunication market. Many people use the Internet, via VOIP, to make telephone calls although they may not realize that their call is being routed via IP packets.
This would be one interesting acquisition if it did happen, if for nothing else reuniting AT&T with one of its spinoff companies. AT&T has a lot of assets (well those that it hasn't sold off) mostly tons of fiber in the ground, not just in the U.S. but internationally as well.
AT&T is sort of caught in the middle of things, they have a failed local business, long distance is dieing (if it's not dead already), and a highly competitive market place for IP services. What else does AT&T have that everyone else doesn't? They don't have their research labs any more (Lucent - another company in a downward spiral, hopefully coming back soon) or their computer division (NCR) and anything manufactured today isn't made by good old Western Electric, it's just rebranded (or someone bought the rights to the name.)
It's sad to see one of the leaders in telecommunications and research in such a poor state of business. I miss the good old days. Many people forget that AT&T (well Bell Labs) invented just a few things like the transistor, laser, TV transmission, etc. not to mention built automatic mechanical exchanges (think crossbar switches!) in days when all there were was vacuum tubes.
I remember getting tours of the 'Labs back a decade or so ago, it was still impressive what they were doing with technology back then. A lot of wireless stuff that's coming out now was created by them. Supposedly during their peak they'd churn out 2-3 patents a day, every day of the year. They had people that would do just hypothetical research, sitting around dreaming about nothing but the big bang theory and getting paid for it. Now that's research.
Why would you, as SBC, be looking to put out more cash, if you just LOST cash last reporting period?
Depends on why they lost money and what sort of a deal they can get. One down quarter isn't necessarily a big deal. AT&T has a real gem of an asset in their enterprise business and another in their network which I'm sure is why SBC is interested. They've talked before about a merger. BellSouth did too a few years back. But AT&T also has a lot of debt and some rapidly sinking businesses. SBC would have to rework or get rid of this debt for the merger to happen. But if SBC can get a sweetheart deal, it might make sense.
Personally, I think the deal is probably a bad idea. As I mentioned before, AT&T's debt load is a problem. There also are competitive issues. The merger could jeapordize SBC's relationship with BellSouth which jointly owns Cingular with SBC. Plus there is the question of whether it can pass regulatory scrutiny; something that is by no means assured. I don't see any obvious way to fix AT&T's problems but I don't have all the facts either.
AT&T is, alas, a sad shadow of its former self, and by that I mean its post-divestiture former self. But it is still a significant competitor, both the largest long distance company (a declining-revenue market, to be sure) and a significant local player (its TCG is a big player in metro fiber). Plus they've got some ISP operations. It would be sad to see Ed's Evil Empire get a hold of them.
;-) If he gets AT&T, he feels his P. is again bigger than that of Ivan Seidenberg of Verizon (or especially Ivan's predecessor Ray Smith, whose ghost hangs over the place).
Ed Whittacre wants them for the same reason he bought SNET and AT&T Wireless (which was not owned by AT&T at the time) -- he's constantly trying to be bigger than Verizon. I call it a "P.D." contest, where "D." stands for Dimensions. Frank Zappa had a song by that name, in case you can't guess what the dick I'm talking about.
AT&T's core problem is that they are operating in highly competitive markets, and their internal culture grew up in a monpopoly and never adapted. SBC, on the other hand, is, uh, well, if the question is acting competitive, they're like asking a tropical fish to be a downhill ski instructor. Without monpopoly power, SBC is dead meat.
I'd mod you up if I have the privs. These guys are getting clobbered by voip and seem to be doing nothing about it. Lower prices. Give me voice mailboxes. Give me free caller id. Instead of buying AT&T spend the money and run fiber to homes. Provide tv services.
If we can get the corporations out of our airwaves and build wireless mesh networks, we won't have to worry about monopolies. That should be the goal.