Marriages and divorces are accenting the wireless telecom industry today.
The biggest telecom provider of them all, AT&T Corp., announced late last month it would split its businesses into three different companies. Chairman Robert Allen said the company wanted to avoid the perceived conflict in its customers’ eyes between the company’s services and systems divisions, noting some AT&T equipment customers compete with the telecom giant in the services arena.
This has been a potential conflict in the cellular industry ever since AT&T bought McCaw Cellular Communications Inc. And while some of the Baby Bells interviewed by RCR said they didn’t have a problem buying cellular equipment from AT&T even though AT&T was a cellular carrier rival, it had to be a little odd. Bell Atlantic Nynex Mobile admitted the company was uncomfortable with AT&T wearing both hats.
AT&T’s move to break up the business highlights a fundamental shift in company strategy. After all, it seems like only yesterday AT&T was expanding through its acquisitions of NCR and McCaw. (The telecom industry in general barely lets a week go by without announcing yet another acquisition or alliance.)
But AT&T decided bigger isn’t always better.
Will this move cause other telecom behemoths to rethink their acquisition strategies?
Only time will tell. Some ideas that seemed divine a few years ago are looking a little more hellish today.
U S West recently filed a lawsuit protesting the planned merger between Turner Broadcasting and Time Warner. Turner competes against Time Warner Entertainment, in which U S West holds a 25.5 percent stake.
“We have explained our concerns to Time Warner that the separate legal and economic structures of Time Warner Inc. and Time Warner Entertainment will make the potential synergies of the Turner merger difficult to realize and will create innumerable conflicts of interest and violations of fiduciary obligations,” said U S West Chairman and CEO Richard McCormick.
At its inception in 1993, U S West’s 25 percent investment in Time Warner Entertainment was big news, destined to help define the ultimate convergence that would take place between telecom and cable. It also was supposed to be a threat to slower, more traditional companies that planned to compete in the soon-to-emerge personal communications services industry. U S West and Time Warner would combine their expertise to deliver PCS as part of their offering to bring communications, entertainment and information to homes and businesses by 1998.
Although Time Warner still plans to take part in PCS through reselling agreements, it no longer plans to bid for any spectrum. U S West instead chose to throw its PCS assets in with three other major telecom players-AirTouch, Nynex and Bell Atlantic.
Two years ago, there were many cable companies testing PCS as part of company plans to expand and conquer in PCS. But today the Sprint consortium, including cable companies TCI, Cox and Comcast, is the only large player.
Two years ago, “convergence” was the choice phrase and the hip crowd to hang with.
Two years ago, the world was a different place.
