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| AT&T: one step away from oblivion |
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| Saturday, 09 October 2004 | |
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AT&T was the first and arguably
the only global ‘marque’ in telecom operating. Now it faces extinction.
Here are nine sure reasons why this has happened... AT&T – still known as ‘Ma Bell’ by
those with long memories and an attuned sense of irony – is a skeletal
figment of her former self in the United States and a spent force in
the global telecom arena which she once bestrode like a colossus. Her
supplicants and would-be partners were once on their knees before her;
now it’s the grand old dame herself who kneels and wails and keens. AT&T’s current share price leaves it somewhere near the bottom of the telco equity tree, struggling to match developing world telcos and eclipsed by the likes of Australia’s Telstra, Telenor of Norway or Portugal Telecom. Today’s true giants, such as Verizon and SBC in the US or Deutsche Telekom and France Telecom abroad, make AT&T look very puny indeed. We are back to the Book of Samuel: “how are the mighty fallen in the midst of battle!". Truth to tell, there was not much of a battle at all. But there were some careless strategies along the way. They should be charted. Do as I say… 1) 1956: 80 years after AG Bell laid the seeds for what, in 1885, would become the American Telephone & Telegraph Company (AT&T), the company settles a seven-year antitrust action restricting its business to the national telephone networks and government systems. This was not AT&T’s first brush with federal law: the 1913 ‘Kingsbury Commitment’ had seen AT&T anointed as “a government sanctioned monopoly”. 2) 1982: A further antitrust suit, launched by MCI in 1974, saw AT&T agree to divest its local operations in return for a lifting of restrictions set out in 1956. The MFJ was thus arguably the result of regulatory wrangling which has lasted more than 25 years, during which time AT&T had got on with its ‘day job’ by developing and implementing technologies such as transatlantic cables, fibre-optics, digital exchanges, satellite communications and even the modem. 3) 1984: AT&T and the Bell System were broken up on 01 January 1984. Seven ‘Baby Bells' or regional holding companies (RHCs) were created in the divestiture brokered as part of the MFJ: Ameritech, Bell Atlantic, BellSouth, NYNEX, Pacific Telesis, Southwestern Bell and US West. Within 12 years these ‘seven sisters’ were four: BellSouth, Verizon, SBC and Qwest. That is not a telephone ringing, that’s an alarm bell. 4) 1991: AT&T, still a monolith since, despite being shorn of the RHCs, it remained vertically integrated via Bell Labs (research) and AT&T (manufacturing), gambled on convergence with the US$6bn acquisition of NCR, the computer maker (founded in 1894). In keeping with the convergence theme of the times, NCR was renamed ‘AT&T Global Information Solutions’ (GIS). 5) 1993: While still balancing its PTO, manufacturing and computer arms, AT&T bought the leading cellular independent McCaw Communications for a quick US$20bn, swiftly renaming the new venture ‘AT&T Wireless’. 6) 1995: The company formed by the MFJ divestiture became the architect of its own ‘trivestiture’. Under the September 1995 plan, AT&T would remain the brand for networks and services while the manufacturing arm would be sold off as ‘Lucent’ and the computing arm renamed ‘NCR’, which might just fail the originality test. 7) 1999: AT&T seeks to rejuvenate its position in the local loop, already bolstered in the wireless sector, by aggressively seeking cable TV inroads. It buys Tele-Communications Inc (TCI) for US$40bn, renaming the operational unit ‘AT&T Broadband’ and adding the assets of MediaOne at the price of US$44bn. This makes AT&T Broadband – which is little more than Ma Bell’s cable unit – the biggest CATV operator in the US and the most expensively-assembled in the world. 8) 2000: Another 'trivestiture'. AT&T Wireless is spun off (completed in July 2001 and currently the subject of a US$40bn takeover by Cingular Wireless, a joint-venture between Verizon and BellSouth). AT&T Broadband is subsumed in a merger with Comcast. 9) 2004: ‘Rump AT&T’ – and by now it is no more than a rump – splutters on. AT&T is a wreck. In October it announced a US$11bn asset writedown and a US$1.1bn charge against the next 7,500 lay-offs. "In response to recent regulatory developments and a highly competitive market, we have made some tough decisions to reduce our workforce and cut costs", said AT&T Chairman and CEO Dave Dorman on 07 October, 2004. "Ongoing investments in our network and systems around the world have allowed us to significantly improve customer-service metrics while driving industry-leading productivity". This followed a limp attempt to punch its weight in the VoIP regulatory ring, and news in August that AT&T would no longer seek new customers in its once sacrosanct consumer voice market. Ten minutes to midnight Where does this leave AT&T? The answer looks to be nowhere as its market capitalisation crumbles to US$11bn and the poor old bird has nothing left to sell off with a flourish. Gone are the Bells. Gone is Lucent. Gone is Bell Labs. Gone is NCR. Gone is Wireless. Gone is Broadband. Gone, too, is the legacy of AG Bell. One analyst, asked to contribute to this article and suggest what the next step might be for AT&T, said simply, “a garage sale”. Other solutions might be found on the global carrier front – AT&T at one time or another played leading roles in the Unisource and Concert alliances – but the company itself acknowledges by writing down its asset value that it is not even worth what the slumped share price suggests. These days, buying AT&T, which would once have been the deal of the century, would be equivalent to shooting a horse in order to spare it further misery. The worst possible fate would be for AT&T to be bought for the strength of its brand alone. Except for the fact it seems too late for that, as well, since the brand appears 'diluted'… Jim Chalmers |
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