To ALL,
AT&T, Sprint May Move Faster to Pursue Deals
NEW YORK - WorldCom's stunning bid for MCI Communications will likely prompt
AT&T and Sprint to move more quickly in pursuing acquisitions or alliances in the local
telecommunications market, industry analysts say.
We'll probably see AT&T pull the trigger on a local opportunity," said Chris Landis, an
analyst with TeleChoice, a telecommunications industry consulting firm.
In the next 30 days we're going to see some movement. The market is doing what the
regulators couldn't do (increase competition at the local level). We're going to see
some fast movement," Landis said.
WorldCom's move to acquire MCI for $30 billion in stock churned up market rumors
that AT&T may seek to acquire GTE and sparked speculation that Sprint could
partner with SBC Communications Inc., analysts said.
GTE would give AT&T a broad local base as well as a strong wireless position. Sprint
and SBC, meanwhile, would fit well geographically, analysts said.
AT&T previously sought to link up with SBC, but the two cooled their merger
discussions amid stiff resistance from regulators and public criticism. Analysts said a
combination between Sprint and SBC may be more palatable to regulators.
Shares of regional local phone companies and competitive local exchange carriers
continued to rise Thursday after a strong performance Wednesday, amid speculation
that a possible WorldCom-MCI deal would spark further consolidation in the industry.
GTE gained $1.625 to $48.375 on the New York Stock Exchange. WorldCom, the
most active Nasdaq issue, added $3.50 to $37.875. The American Stock Exchange's
North American Telecommunications Index gained 4 points, or 0.76 percent, to
533.07.
Long-distance companies have been slow to move into local markets. They have been
hampered by resistance from the local incumbents -- which until 1996 used to be
monopolies -- and regulatory difficulties.
Linking up with an existing local carrier would offer easy entry into the market, which
promises to be slow and costly to crack, analysts said. Combining forces would also
allow companies to offer all the elements seen as critical for future success -- from long
distance to local service, as well as Internet and wireless services.
Although AT&T and Sprint have worked to diversify their businesses, they still need a
way to augment their local strategy," said James Moore, chairman of GeoPartners
Research, a strategy consulting firm.
A combined WorldCom and MCI would not force AT&T to change its strategy, but
maybe it says 'Move more quickly,"' Moore said.
AT&T said Wednesday that WorldCom's bid for MCI will not affect AT&T's strategy
in the least." But analysts said AT&T has floundered for more than a year and cannot
afford additional delays in tapping a new chief executive and refining its strategy.
AT&T has been seeking a new leader to succeed Chairman Robert Allen. The former
heir-apparent, John Walter, quit in July when the board declined to hand him the reins.
Analysts said an announcement on the CEO search as well as a decision on whether to
adopt AT&T operating chief John Zeglis's reported franchising proposal could come
after the telecommunications giant's next board meeting later this month.
AT&T has been silent on the proposal, but recent news reports have said Zeglis wants
AT&T to franchise its name to smaller local and wireless phone operators as a way to
establish a national presence in those businesses.
Buying a local company would represeent a more aggressive commitment and allow
AT&T to retain better control over its assets -- control if may lose if it moves to
franchising, analysts said.
Buying a local carrier with a strong executive base may also be a way for AT&T to
possibly acquire" a new CEO at the same time, some analysts said.
AT&T declined to comment Thursday.
Other industry watchers said speculation that AT&T and Sprint would pursue
acquisitions was unwarranted.
The 'monkee see, monkee do' philosophy is overdrawn," said Michael Geran, an
analyst at Donaldson, Lufkin & Jenrette. |
