I was a bit taken by surprise this morning to hear on “Marketplace” that SBC is in talks to acquire AT&T for approximately $15 billion. As soon as I arrived in the office I hit the web and poured over the coverage on wsj.com. Since that is a subscription site, take a gander at this article from the New York Times talking about the SBC – AT&T merger talks.
The acquisition of AT&T by one of the RBOCs has been one of those shoes which the American telecommunications industry has been waiting to drop for some time. Those looking at AT&T’s shrinking consumer business and increasingly challenged enterprise business have been expecting an acquisition for some time. The expectation always was that Bell South was going to be the RBOC to make the acquisition, but executives from AT&T and Bell South could never agree on a price. AT&T execs always seemed to be waiting for some sort of appreciation in their stock price or the offer of a premium to close the deal. If the agreed sale price is anywhere in the neighborhood of $15 billion it would seem the executives at AT&T had finally gotten over the notion that the company should earn any sort of premium.
One curious question this raises in my mind is the status of AT&T’s planned virtual mobile network offering. Following the unwind of AT&T Wireless and the subsequent acquisition of that company by Cingular (itself a join venture of SBC and Bell South) has left AT&T without any wireless offering of their own. AT&T had a plan to purchase wholesale wireless network access from Sprint to develop their own enterprise-focused wireless service.
This is far from a certainty, but I can’t help but wonder whether or not the executives at SBC, who have a stake in the success of Cingular, wouldn’t try to apply pressure on AT&T either to lease wholesale network capacity from Cingular or put AT&T’s wireless plans on hold pending completion of the merger. It would be hard to believe that AT&T executives would be happy with such a delay, particularly if a significant element of their strategy then becomes contingent upon the closure of this merger. If I were at AT&T I wouldn’t want to wait. Also, Cingular have not shown that wholesale network sales are a part of their strategy to date.
All those possibilities aside, this merger is most likely a very good turn of events for the telecommunications industry. Finally and slowly some of the excess capacity and outdated competition is subsumed into a new industry order nearly a decade after the Telecommunications Act of 1996 and four years after the industry bust.
Consumer groups are likely to voice opposition to the acquisition, though it’s mostly a neutral event for consumers considering the waning role and influence AT&T play. The heritage of the AT&T brand completely overshadows the role the company plays in the industry today. Hopefully one thing consumer groups will be able to do is make the approval of this acquisition contingent upon SBC abandoning their new Voice over IP termination tariffs.
Now the question is when MCI will be acquired by either Verizon or Bell South. That’s the other shoe waiting to drop in the US telecommunications industry.
