Many analysts make the mistake of narrowing their focus so tightly on a particular industry segment that they ignore the important macro and external influences that impact trends in corporate behaviour. The main error is to forget that large companies in sectors such as telecom have two peer groups: other telcos, obviously; and, perhaps less obviously, other ‘blue chip’ corporations around the world. Both peer groups exert considerable pressure on the strategic thinking of C-level management tiers.

Thus last week saw talk of a US$16bn takeover of AT&T by SBC (click here for details), for which board approval was confirmed today. It all looked pretty thrilling until it was trumped, in terms of scale, by Proctor & Gamble’s US$57bn purchase of Gillette. Suddenly, the SBC/AT&T deal looks rather minor.

The workings of the world bourses and their attendant drones mean that scrapping for the front page of the financial journals is a legitimate element of corporate strategy. At the C-level, this translates not so much into macro-economics as macho-economics.

A rather unsavoury comparison can be made with the age-old competition to see ‘who can pee the highest?’. To SBC’s chagrin, P&G has thus raised the bar. This makes it not unlikely that someone will wade in with a US$100bn merger soon, with every chance that it will come from the ICT sector.

Of course this will have much to do with strategy, synergy and convergence and all those other good things. But don’t discount the importance of testosterone, either, in this sadly male-dominated industry: the internal pressure is building and will need an outlet soon.
Jim Chalmers