DENVER, United States-Dramatic consolidation in the U.S. telecommunications industry has marked the first part of the year, topped off most recently with news the nation’s largest long-distance and wireless carrier, AT&T Corp., plans to buy the nation’s second-largest cable TV company, Tele-Communications Inc.
The US$48 billion deal is significant because it gives AT&T access to the local telephone market from which it has been forbidden to compete since it was compelled to divest its local telephone business nearly 15 years ago. According to its 1982 consent decree with the U.S. government, AT&T was not allowed to compete in the local phone market, while the regional holding companies spun off from AT&T were kept out of the long-distance market.
Legislation signed more than two years ago, however, gave long-distance and local carriers permission to compete in each other’s markets as long as they opened their own markets to competition. While seemingly little has been gained in the way of increasing competition, the telecom act has paved the way for the wave of mega-mergers taking place.
Although mainly driven by considerations other than wireless, the mergers nevertheless concentrate wireless power into fewer and fewer hands. David Kerr, director of wireless programs at consulting firm Strategy Analytics, said if all the mergers on the table today are completed, the top six wireless carriers in the nation will control more than 70 percent of all wireless business.
The AT&T/TCI tie-up ranks fourth on the list of the largest merger-and-acquisition deals of all time. U.S. telecom mergers and acquisitions, including the AT&T/TCI marriage, account for five of the 12 largest deals to date worldwide. Second on that list is the proposed merger between former AT&T operations Ameritech Corp. and SBC Corp., announced in May and valued at more than US$72 billion.
The deals are viewed by some as a piecing back together of the U.S. telecommunications system of nearly 15 years ago. If the SBC/Ameritech deal is completed, only four of the original seven remain: SBC, U S West Inc., BellSouth Corp. and Bell Atlantic Corp.
While insisting his company is not putting the Bell system back together, Edward Whitacre, chairman and chief executive officer of SBC, has managed to combine three of the seven Baby Bells under the SBC umbrella to create potentially the largest wireless carrier in the country. The company acquired Pacific Telesis Group last year in one of two mergers that married Baby Bells.
The merger of Bell Atlantic Corp. and Nynex Corp., also completed last year, was the other former Bell-company merger.
Patricia Martin, director of Decision Resources Inc., a consulting firm, said approving the SBC/Ameritech deal would make it difficult for the Federal Communications Commission and the Department of Justice to block another huge marriage of Baby Bells. Approval of the SBC/Ameritech deal would put pressure on two of the remaining Baby Bells-Bell Atlantic and BellSouth-to merge, she said.
Bell Atlantic provides service in the Northeastern United States, while BellSouth covers the Southeastern regions. Merging would give the companies a footprint covering most of the eastern states. The two companies are flanked to the West by territory controlled largely by a combined SBC/Ameritech/Pacific Bell, disrupted only by the large mountain territories in the West, held by U S West.
Smaller mergers
The SBC/Ameritech and AT&T/TCI deals also were preceded by a wave of acquisitions among carriers in smaller markets.
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