WHEN WE SPOKE to AT&T's CFO Tom Horton last year, he argued that consolidation was necessary in the US telecoms market if pricing pressure were to be reduced and long-term revenue decline reversed. "We're near the end of a multi-year shake-out in the industry and some of these business models are not sustainable," he said.
He was right. Three months later, this January, his own company was bought by SBC in a deal valued at $16 billion. And on February 14, Verizon announced that MCI, the only other carrier with a global network and strong corporate customer base apart from AT&T, had accepted its stock and cash takeover offer of $6.8 billion. This followed the $35 billion merger between wireless companies Sprint Corporation and Nextel Communications last December and Alltel's $6 billion January purchase of Western Wireless.
Eat or be eaten now seems to be the sector theme. AT&T has been swallowed up by one of the regional Baby Bells it spawned when its monopoly was broken up in 1984. As rivals jostle to obtain scale, the right product offering and cost savings, a feeding frenzy has begun.
BellSouth, which had previously coveted SBC and walked away from a deal to acquire AT&T for about $19 billion, is now left out in the cold.