AT&T Corp.’s strategy to become three different companies has evoked positive and adverse reactions, but analysts agree the forecast looks good for the wireless business.
Chairman and Chief Executive Officer Robert Allen announced the restructuring following months of discussions and planning among top AT&T executives and consultants. The new AT&T will be comprised chiefly of communications services. The other two companies will focus on communications technology, systems and equipment and transaction-intensive computing, said AT&T.
Supporting the separation is a growing conflict between the company’s services and systems divisions-presently home to AT&T Wireless Services and AT&T Network Systems, respectively-as many AT&T equipment customers also are competitors of AT&T service providers.
Analysts maintain a competitor of AT&T Wireless Services doesn’t want to turn around and fund the same company, or feed the hand that bites it, so to speak.
Too, the Baby Bell equipment clients want to prevent AT&T corporate from learning their business strategies, information that Network Systems’ is privy to, pointed out Mark Hilton, director of the Seattle-based Walter Group telecommunications consulting firm.
“The relationship with AT&T has always troubled us,” said Jim Gerace, spokesperson for Bell Atlantic Nynex Mobile, the combined wireless arm of Bell Atlantic Corp and Nynex Corp. “They are both our largest competitor and we are one of their largest customers.” The split “takes the right steps to correcting that conflict,” adding, “In order to succeed in this business you have to be focused, agile and entrepreneurial.”
On the contrary, “We don’t anticipate changes in our relationship with AT&T as a customer, as a competitor or as a supplier,” said Wendy Carver-Herbert, media relations manager for U S West NewVector Group Inc. “In maintaining our competitive edge, it’s critical to be able to draw upon the best technologies in the business,” which sometimes will be made by AT&T, she added.
Kevin Doyle, a spokesman for BellSouth Corp., agreed. The company’s selection of vendors follows a careful bidding process, said Doyle. When AT&T has been a qualified bidder, they’ve been selected. “It was a bidding process before; it’s a bidding process going forward.” Doyle also pointed out the customer/competitor relationship goes both ways. “They’re [AT&T] a big customer of ours through [long-distance] access.”
“It’s going to be easier to work with them on the wireless side,” indicated Marybeth Johnson, corporate spokeswoman for Ameritech Corp.
Hilton added the two divisions have been at odds internationally as well, each in pursuit of wireless opportunities in their respective business domains, but at times on opposite sides of the fence, members of different consortia.
Pending telecommunications legislation factored in the equation too, say some analysts, addressing the company’s concern the long-distance market would open before it had a chance to participate in the local telephone service industry.
Dividing the businesses provides for better focus in each, said Hilton. “Each division doesn’t have to worry about the other” so they each can do a better job.
However, AT&T risks a down side to the split as financial and other activities of the communications services company will be more apparent to investors. As a smaller, more focused unit, business activities are easier to observe, meaning AT&T could lose its reputation as a solid sure bet investment created in part by its size and variation.
