AT&T's Suicidal Rates.
JohnG
Off topic but these might be worth a look for people interested in telecoms.
The Hidden Baby Bell Monopoly
smartmoney.com
From theStreet.com..
"Mike Armstrong's Dumb Decision"
On a Yahoo! (YHOO:Nasdaq) chat with Jim Cramer last night -- you can find the transcript
here; I think you'll enjoy it -- I said AT&T (T:NYSE) has turned into a heart-breaker of the
highest order. A number of TSC subscribers who were on the chat wrote overnight and Friday
morning to ask why I'd changed my mind.
After all, a year ago I thought AT&T was a promising investment.
You bet I did. But a year -- a week, even a day! -- can change things a lot in this business. And
AT&T is a great example:
AT&T is caught in a downward spiral -- almost a death spiral, the business equivalent of a
pilot's terrifying flat spin -- on revenue from its voice-based long distance. That shouldn't
be a surprise -- the voice business stinks for everybody, with market-rate per-minute
charges plummeting through four cents and rapidly approaching zero -- but it's a bigger
deal for AT&T than for most of its competitors, because AT&T still has a huge
long-distance business. Just not a very profitable one.
Though I applauded AT&T's moves last year to become a "single-pipe" provider of all
sorts of digital services to the home -- from voice to fast data connections to cable service
-- the problems have proved overwhelming.
The cable business, especially -- despite AT&T's semi-successes here in the regulatory
arena -- is a swamp. AT&T wanted that cable line into your home as a delivery mechanism
for lots of profitable noncable services and also as a "last-mile" answer, cutting off the
local-loop carriers' control of your service.
But so many problems still stand in the way of providing constant, high-reliability phone
service over the cable systems for which AT&T spent so much money that I'm beginning
to wonder if the company will ever unravel that one. As opposed to its forecast of two
million cable-telephony customers by the end of this year, I doubt that AT&T will have
500,000. Maybe not even 400,000. Not good.
AT&T has been showing a political clumsiness more characteristic of "the old AT&T" than
of CEO Mike Armstrong's reign.
The idiotic long-distance rate increase it unilaterally imposed on customers earlier this
month -- bumping its nondiscounted residential long-distance customers up to a 24x7 flat
rate of 29 cents a minute, up 81% from the former weekday rate and a whopping 152%
hike on weekends! -- showed that. The company this week rescinded that increase ... but
then this morning Armstrong is saying in The Wall Street Journal that he's going to refile a
new tariff schedule that will have much the same effect.
"I am not going to give this up," he said.
A tip, Mike: Give it up.
The irony, of course, is that AT&T badly needs those higher long-distance revenues. But
with everybody and his brother offering nickel-a-minute calling, how can AT&T possibly
ask six times as much?
Doing this at a time when the FCC is already growling about the company's moves is
political insanity. Has it hired the same strategy advisors who guided Microsoft
(MSFT:)(MSFT:Nasdaq) over the past year?
With the stock down by half, Armstrong's reign -- once so solid and promising -- is starting to
look shaky. But who'd want the job?
As I said last night on Yahoo!, "T is a heart-breaker. I'm scared of it -- too many uncertainties,
too many regulatory and tech pits ahead. I don't need that grief."
Neither, I suspect, do you.
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