Friday, January 28, 2005
Used Telco for Sale Cheap
Rumors of AT&T's sale have swirled down Wall Street for years. Scott Moritz, TheStreet.com's intrepid telecom ace, reports:
What would an incumbent local telco want with AT&T? Distance, the IXC's bread and butter commodity, is dead. Minutes from anywhere to anywhere can be bought in bulk for fractions of a penny. The AT&T physical network? No, maybe some of the buildings and rights of way have real estate value. Free cash flow? Check, but for not much longer. Business services expertise? Check, but increasingly it's something that any network-savvy third party can provide -- without the overhead of running an obsolete network. Brand? Once upon a time . . .
Even Kohlberg Kravis Roberts does not appear interested in scrapping AT&T for the value of its piece parts. We live in an era when six good programmers anywhere in the world can create a better service than any of the world's telcos ever produced. The only entities who see substance in AT&T are those who still cleave to the telco mindset. Even these won't pay much.
Alas. So sad.
Though reports by The Wall Street Journal and The New York Times have AT&T and SBC in advanced merger talks, sources familiar with the discussions say nothing is particularly imminent, and that no exclusive allegiances have been created.snip
One source familiar with BellSouth's discussions with SBC said he "doubted that AT&T and SBC could reach an agreement." He also said that BellSouth was "still very much in discussions with several potential merger candidates."
What would an incumbent local telco want with AT&T? Distance, the IXC's bread and butter commodity, is dead. Minutes from anywhere to anywhere can be bought in bulk for fractions of a penny. The AT&T physical network? No, maybe some of the buildings and rights of way have real estate value. Free cash flow? Check, but for not much longer. Business services expertise? Check, but increasingly it's something that any network-savvy third party can provide -- without the overhead of running an obsolete network. Brand? Once upon a time . . .
Even Kohlberg Kravis Roberts does not appear interested in scrapping AT&T for the value of its piece parts. We live in an era when six good programmers anywhere in the world can create a better service than any of the world's telcos ever produced. The only entities who see substance in AT&T are those who still cleave to the telco mindset. Even these won't pay much.
Alas. So sad.
Comments:
Da BRAND, David, da BRAND. That's the primary value of AT&T, and what they're leveraging everything against. On my desk, I have an AT&T branded Caller ID box and a multiline phone. Neither were actually made by AT&T or a descendent company (the old digital answering machine on the remaining analog backup modem line is branded Lucent before THEY bailed out on anything to do with consumers.) All of this PSTN gear was bought as the best bang/buck, but there was some residual value in the AT&T brand as it implies that the products aren't comlete crap and there's some support behind them. Expensive, at times, as I discovered with my 900 MHz cordless phone that chews through custom NiCad batteries, but at least I could GET that battery within a reasonable lifetime of the phone.
That the brand has so much residual value is a testament to more than a century of careful nurturing of, and incredible investment in the AT&T brand name. It will have real power when/if AT&T resurrects AT&T Wireless as a virtual network running on Sprint/Nextel. It's the only non-telco brand that's a serious challenge to Vonage for consumer business, and I imagine it's barely an afterthought to handle the VOIP traffic and interconnections generated from CallVantage.
One cool thing if it were to happen... The Bell System name, logo, and AT&T could all be reunited.
Another... SOMEONE will have to stick around to ultimately interconnect the remnants of the PSTN and TOIP - that might be a good job for AT&T; after all, email and fax still haven't wiped out the Telex network (http://archive.salon.com/tech/feature/2000/12/05/telex/print.html)
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That the brand has so much residual value is a testament to more than a century of careful nurturing of, and incredible investment in the AT&T brand name. It will have real power when/if AT&T resurrects AT&T Wireless as a virtual network running on Sprint/Nextel. It's the only non-telco brand that's a serious challenge to Vonage for consumer business, and I imagine it's barely an afterthought to handle the VOIP traffic and interconnections generated from CallVantage.
One cool thing if it were to happen... The Bell System name, logo, and AT&T could all be reunited.
Another... SOMEONE will have to stick around to ultimately interconnect the remnants of the PSTN and TOIP - that might be a good job for AT&T; after all, email and fax still haven't wiped out the Telex network (http://archive.salon.com/tech/feature/2000/12/05/telex/print.html)
