AT&T Completes Acquisition of BellSouth - What Are the Implications?

| January 5, 2007 | Competitive Intelligence Special | Client Access |

Event Summary

On December 29th AT&T completed its acquisition of BellSouth, cementing its lead as the nation's largest provider of business voice, data/Internet and wireless services. Integration has begun to combine AT&T, BellSouth and Cingular's wireless and wireline IP networks, product portfolios and customer care capabilities; Cingular and BellSouth will both switch to the AT&T name and both entities' operations will continue to be headquartered in Atlanta.


Analytical Summary - Highlights

• Current Perspective: Positive on AT&T’s acquisition of BellSouth, because it brings an additional nine southeastern states into the carrier's fold and puts AT&T in a solid lead as the largest carrier in the nation. Equally important, the combined AT&T has consolidated 100% ownership in Cingular, resolving the joint ownership with BellSouth. What's more, the concessions AT&T volunteered to help secure FCC approval mostly address consumer and wholesale issues, such as unbundled services, carrying forward existing contract terms and rates, and low DSL pricing. AT&T's concessions do not fetter the carrier's ability to serve business customers with new restrictions.

Market Impact

• U.S. Business Network Services: Very high on U.S. telecom competitors, because the domestic carrier market consists of just three regional Bell operating company entities – AT&T, Verizon and the far smaller Qwest. While telecom competition is here to stay, AT&T and Verizon are in the enviable position of facing far less oversight and regulation than the old Bell System did, while benefiting from the rapid proliferation of business data, wireless and Internet services, and successfully reuniting many of the old Bell System – obviously a highly complementary fit.
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• U.S. Wireless Services: High on the wireless services segment because the wireless competitors now have a unified AT&T to compete with for converged services. While this was apparent previously, the single entity has potentially faster decision making and development capabilities because it doesn’t have the gating factor of two owners with different visions. Cingular competitors Sprint Nextel and T-Mobile got price caps on special access circuits (DS1/DS3) that serviced its base stations, ensuring that AT&T’s landline entities (i.e., the former SBC and BellSouth) cannot raise prices. Additionally, T-Mobile’s desire for the new AT&T to offer a “naked” DSL (without conditional voice service) at a low rate ($20) came to fruition as it provides a foundation for T-Mobile’s Hotspot @ Home offering.
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• U.S. Enterprise Mobility: Very high on the enterprise mobility market because the domestic wireless carrier market consists of just three tier 1 companies AT&T, Verizon, and Sprint. While telecom competition is here to stay, AT&T and Verizon are in the enviable position of facing far less oversight and regulation than the old Bell System did, while benefiting from the rapid proliferation of business data, wireless and Internet services, and successfully re-uniting many former entities from the old Bell System – obviously a highly complementary fit. Additionally, Sprint and T-Mobile can rest easy given AT&T’s concession to price cap special access services (DS1/DS3) that connect its base stations to AT&T central offices, obviating any anti-competitive possibilities to favor Cingular.
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• U.S. Wholesale Telecom Services: Very high on the U.S. wholesale market, because the domestic carrier market now consists of just three regional Bell operating company entities – AT&T, Verizon and far smaller Qwest. While telecom competition is here to stay, AT&T and Verizon are in the enviable position of facing far less oversight and regulation than the old Bell System did, while benefiting from the rapid proliferation of business data, wireless and Internet services. Wholesale customers stand to benefit from concessions offered by AT&T that maintain existing contract terms and mitigate post-merger disruption.
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