So it now seems that the board of MCI are open to the @30 per share acquisition offer from Qwest. Verizon execs have a few days to respond with a sweetened bid of their own, but this latest event seems to indicate that MCI’s shareholders voices are finally being heard screaming “take the money!”
To my mind the Verizon deal is still a better one structurally. We’ll see who wins out in the end, though.
So now that their proposed merger with MCI has been rebuffed, it appears Qwest have filed objections to the mergers of SBC and AT&T as well as Verizon and MCI. The actual complaint was filed with the California Public Utilities Commission. I can’t really say that I’m surprised by this.
The most interesting quote from the complaint is:
It is difficult to see how these two transactions could ever be found to be in the public interest.
Qwest’s merger with MCI would have differed structurally from the Verizon-MCI merger in no concrete way. This is just sour grapes on the part of Qwest. This complaint comes on the heels of complaints from other telecommunications companies and consumer groups regarding the mega-mergers. This is all to be expected since the SBC and AT&T merger effectively undoes a divide that has been maintained in the American telecommunications industry for 20 years.
There’s a lot going on in the telecommunications industry at the moment. There are stories of informal offers being made by Verizon to acquire MCI, this to counter Qwest’s offer to acquire the company as well. It’s interesting to note that, if the numbers can be believed, neither party is falling over themselves to offer a premium far beyond the approximate $6 billion market cap for MCI. Verizon is certainly the stronger of the two suitors, and has the added benefit of not having faced their own criminal investigations for their accounting practices. After the WorldCom debacle, I would think the executives at MCI would look warily at Qwest, who have had their own accounting practices called into question.
In a Wall Street Journal on-line article today on all the deal-making there’s a throw-away comment that yesterday AT&T announced that they’ll walk away from their wireless resale deal with Sprint. A quick look around the web doesn’t give me any information that confirms that, but there you go. Should we suspect AT&T will start over again with a Cingular resale deal? I still don’t think this is a very good idea for AT&T.
The boards of the companies met late into the night and, according to the Wall Street Journal, approved the acquisition of AT&T by SBC.
The final price is evidently around $16 billion and based entirely on SBC stock (0.77942 shares of SBC common stock for each common share of AT&T stock to be exact). That equates to a value $18.41 a share for AT&T’s sale price based on the price at which SBC shares closed on Friday. AT&T will also pay each shareholder a special dividend of $1.30 per share at the time of the closing. All of these numbers come from the Journal.
SBC are expected to keep the AT&T brand, at least for business customers. This is a very good idea, in my opinion, because the brand recognition that comes along with the AT&T brand is substantial. What SBC are really buying when they buy AT&T is their enterprise account base, which is pretty substantial.
The deal is expected to close sometime in the first half of 2006. That’s an extremely long time in the telecommunications industry. I would speculate that AT&T will go forward with their mobile offering using Sprint’s network. The terms of the closure of this merger is just too long for AT&T not to do this, and it might make a good talking point for how this acquisition won’t hurt competition. Likewise AT&T should push to take as much business as they can with the CallVantage voice over IP service.
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.
The Wall Street Journal is running a relatively short piece announcing that Sprint and Nextel have entered into advanced negotiations for a merger of equals between the two companies.
One exciting tidbit is that Reston, Virginia will be the headquarters for the merged corporation. Some good news for Northern Virginia which has been hard hit by the telecom industry collapse. At least some of the consolidation is sucking some jobs our way. Too bad for Kansas, I guess.
The new company is going to be based largely on wireless services. The rumor is that the merged company is going to spin off Sprint’s local services business, which should fetch some decent coinage. Maybe from the likes of Alltel or one of the RBOCs. I’m not sure where all Sprint have their local businesses.
A big question for me with this merger is on the wireless technology front. Sprint use CDMA and Nextel use iDEN. The latter is a proprietary, TDM-based wireless protocol which makes Nextel’s stand-out (and annoying) push-to-talk function work. The CDMA carriers Verizon Wireless and Sprint have made their own forays into the PTT arena with limited success. Nextel even ripped on Verizon Wireless for having long connect times for PTT. How will they consolidate these networks? How will the merged company continue to meet the expectations customers have for PTT responsiveness through the technology transfer? What manufacturers are going to be able to make equipment for the merged company? How does this impact Sprint’s recent announcement of approximately $3 billion in capital into their wireless infrastructure? Considering the technology hurdles these companies will have to overcome, how long before stockholders see the benefits of “synergy?”
Unlike the Cingular-AT&T Wireless merger, this is not a merger of similar technologies. I suspect that this merger is going to take much longer to deliver any value to shareholders. Considering the integration challenges of Cingular and AT&T Wireless that’s really saying a lot.
According to CNN Money and other news sources, BT Group PLC will purchase Infonet. BT Group are the parent company of British Telecom (my former employer), and Infonet are a global telecommunications company owned by several carriers who are the incumbent or strong telecommunications players in their home national market. Infonets owners are Telefonica of Spain, KPN of the Netherlands, KDDI of Japan, Swisscom of Switzerland, Telstra of Australia and TeliaSonera of Sweden and Finland.
This deal follows closely on announced plans that BT will purchase Radianz from Reuters. Radianz provide value-added communications services to finance sector customers. Radianz had been a joint venture of Reuters and Equant, which is a unit of France Telecom.
These two deals are a mixed bag for BT. Neither of the operations has been relatively successful at increasing their top line revenue. Both were cursed with channel conflicts and conflicts between and among parent entities. Infonet is constantly being given a back seat by its parents, which are also Infonets channel to market within their home markets, generally in favor of the parent companys alternative international strategies. Examples include KPNs European assets it acquired from its previously failed joint venture KPNQwest or Telstras struggling regional carrier Reach (Telstras joint venture with Pacific Century Fiber Works of Hong Kong). While its parents lurched from one failed international strategy to another Infonet continued to get the short end of the stick. Perhaps acquisition by BT and integration with BT Global Services unit (for which I used to toil as a competitive intelligence manager) can improve Infonets lot.
Certainly the customers that Infonet and Radianz bring to the table for BT represent scale for the global services business. This is a big plus for BT, which has struggled to balance the need for continued capital investment with the need to ensure a revenue stream to justify that investment these past few years. BT have taken a very cautious approach to capital investment and have represented a voice of sanity when compared to the spend-happy approach taken by AT&T or WorldCom during the boom days.
The trouble for BT is going to be the integration of these operations. One of the problems with how BT go about things is that all forward movement tends to stop or slow to an absolute crawl while they digest new operations. Features and functions are added at too slow a pace to compete with smaller, more nimble competitors. What BT will struggle to do as it digests Radianz and Infonet is keep competitors like Equant or new market entrants like Vanco at bay. Assuming no new M&A activity impacts Equant, they will be able to improve features and functions they offer customers and turn their operations into a true professional services business organized to service customers in specific, lucrative vertical markets such as finance. Vanco, by comparison, are at an advantage because theyre very small and nimble. Vanco have also shown an ability to add features and functions at the management and OSS level that suits their virtual network model very well. BT cannot afford to simply stand still lest these competitors eat its lunch and entice all of those Infonet customers away.
So, the merger closed yesterday. As of yet there are no big changes evident in my service. My phone still shows “AT&T Wireless” as my service provider. I had actually expected that to change almost immediately, because already in the past few months my phone has been telling me I was roaming on the Cingular network more and more. Somehow I had envisioned effectively a switch being flipped and all of a sudden I would be able to take advantage of the coverage of both networks. Evidently not because the Cingular signal is much stronger than the AT&T Wireless signal at my office, and I’m showing a middling AT&T Wireless signal instead of the full-on Cingular signal I’ve gotten from time to time.
Also, this tidbit from the Cingular web site caught me a bit by surprise:
Plans are already underway to make Rollover Minutes available to you. Please check back on November 10, 2004 for an update. Our goal is to have this feature available to you by this holiday season. To get a plan with Rollover, you will need to change to a Cingular Nation Plan $39.99 or higher. You will also need to get a new Cingular GSM phone.
I thought to myself why should I need to change my phone if I already have a GSM phone? Elsewhere on the Cingular site:
Q: Why do I need to get a new wireless phone when I want to get Cingulars current rate plans or services?
A: Cingular’s rate plans and services require unique software in your wireless phone to function properly. Unfortunately, AT&T Wireless phones are not equipped to support many of the benefits of Cingular’s voice and data services. Therefore, to take advantage of the latest services Cingular offers, a new handset is required.
This kinda sucks. I’ve had my Nokia 6820 for about 6 months now. That’s a bit early to be getting a new phone, and since the Treo 650 doesn’t have WiFi (or use graffiti, which I still prefer) there’s not really a phone out there right now I like better. The Cingular site is replete with instructions to “Check back on 10 November for more information,” so maybe they’re just hopping to not impact the presidential election or something. I’m also not entirely sure I buy it. Rollover Minutes is a BILLING plan, eh. How can the software in your phone impact your billing? I would think those issues would reside somewhere in the billing element of the OSS, no?
Who knows– my hope is that when final word comes as to what will be required that firmware upgrades will be a possibility.
This morning the Washington Post had this piece on the low-key nature of the AT&T Wireless – Cingular merger. While the piece was a relatively fluffy one (as one comes to expect from the business section of the Post) it did touch on the very interesting issue of branding for the soon-to-be-former AT&T Wireless and their former corporate parent AT&T.
A lot has been going on with these two companies in the last six months or so. AT&T is effectively on the auction block being ready to be bought by Bell South or some other poor bastard, announcing a withdrawal from the consumer market while at the same time putting on an advertising blitz during the Olympics built largely around their consumer VoIP service. And if that, in and of itself were not confusing enough…
AT&T Wireless, which is a completely separate company from AT&T, mind you, had their own advertising blitz during the Olympics. One will recall the “How many bars?” ad with swimmer Michael Phelps. That ad push came on the back of months and months of bad coverage in the press that AT&T claim actually hurt their reputation for having licensed the AT&T Wireless brand to the company AT&T Wireless. Should I just start referring to these companies by their stock ticker symbols (T and AWE) to cut down on the confusion?
It seems Cingular are going to take a slow migration plan with the brand. I actually think this is a mistake. Considering the troubles AT&T Wireless have had I really think this branding exercise should be done like removing a Band-Aid: tear it right off. Cingular should bring in the blokes from Cisco who re-brand the companies their acquire and just completely redo the AT&T Wireless retail locations. They should make a big push to the current AT&T Wireless customers and get all of the service contract plans and features they can into their hands immediately (like roll-over minutes). The new company should use this as an opportunity to tell customers the problems of the past are behind them and engage in some top-notch systems consolidation exercises to truly deliver on that promise.
Today the New York Times ran this piece (registration and urine sample required) on the upcoming merger of Cingular and AT&T Wireless. The article touches on the operational issues that are going to come from combining the two operartions, including a brief mention of impending restructuring and layoffs within both organisations.
Conisdering the considerable troubles that have taken place at AT&T Wireless I think it might be more likely that the AT&T Wireless folks would see deeper cuts on their side of the fence. Also more likely the case because Cingular is the company making the acquisition.
The NYT article makes note of disparate corporate cultures being a hurdle that will need to be overcome as well. This piece from Seattle Post Intelligencer last week says a lot about the business culture at AT&T Wireless, particularly the change in culture from the McCaw Cellular days to the changes as AT&T placed their own management within a very freewheeling, energetic and entrepeneurial organisation. While I’m sure some who look back at the McCaw days are painting a rosier picture than was reality because of the filter that is nostalgia (“Ah, my glory days in the American Communist Party!”). But having myself seen the AT&T culture up close during my days in the Concert joint venutre I can only imagine how the imposition of AT&T’s culture would have played out in those early days. For a bit of background, AT&T’s corporate culture is extremely process-driven, more heirarchical than the Catholic Church and the average American high school social structure combined and a stubborness bordering an psychosis. Nostalgia aside, that absorbtion could not have been fun for those who came from McCaw, but probably put it on the right course to be acquired by the likes of Cingular. While I have less first-hand insight into the corporate culture at Cingular, it may be safe to assume the cultures of SBC and Bell South, both being Regional Bell companies, is a closer match to AT&T’s culture than anything that could remotely be called “freewheeling” or “entrepeneurial.”
Now, if only the management of Cingular can undo so many of the mis-steps AT&T Wireless management have made in the past year or so.
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