Another article that may not be pleasing to the naysayers and bashers but what the heck...
US Telecom Merger Frenzy Continues
By Jessica Hall
NEW YORK (Reuters) - U.S. telecommunications companies continue to
race for partners as the voice and data business becomes increasingly
global and the Internet blurs country borders.
"Everyone's in play. Everyone's always in play for the right
price. ... The people who are the busiest right now are the investment
bankers coming up with proposals on how to roll up these different
companies," said Daniel Briere, president of industry consulting firm
TeleChoice Inc.
Bell Atlantic Corp. and GTE Corp. are holding merger talks to create a
combined company with revenues of about $53 billion and control of
about one-third of the local telephone market, a source familiar with
negotiations said Monday.
These talks follow the announcement Sunday by AT&T Corp. and British
Telecommunications Plc that they would merge their international
operations in a $10 billion global partnership.
These deals, on the heels of other megamergers in the industry, puts
new pressure on the other regional carriers and long-distance
companies to find a mate before all the prime partners are gone.
"Competition of the future is nothing like that of yesterday, and the
phone companies of the future look nothing like they did in the past,"
said Jeffrey Kagan of Kagan Telecom Associates.
Each new deal stretches the concept of a telecommunications giant,
creating a large scale on which companies must compete. Companies must
be able to provide a wider range of services to customers who want the
convenience of having their telephone, Internet, wireless and paging
service from one provider on one bill.
Traditional voice telephone carriers are increasingly becoming data
companies due to the explosive popularity of the Internet and data
services. Corporate clients also require a more sophisticated level of
service as their own businesses become more global and more fast-paced
and competitive.
"Solo companies can survive. But they will not thrive if they can't compete
on the same level as the titans," Kagan said.
Telecommunications companies have been snatching up rivals to acquire new
businesses or expertise such as data services or wireless technology, and
to extend their geographic coverage to serve a wider range of customers.
The AT&T-BT alliance "puts a lot of pressure on Sprint. They need to their
act together with GlobalOne. Sprint is really at the crossroads where they
could really fall behind," Briere said.
GlobalOne is Sprint Corp.'s international partnership with Deutsche Telekom
AG and France Telecom.
Sprint has said in the past that it believes it can thrive on its own. but
analysts expect the company would agree to a takeover for a high enough
premium.
The possible GTE-Bell Atlantic merger shows the need for both geographic
reach and new technology, analysts said.
A combined GTE-Bell Atlantic would result in a company with local phone
operations in 41 states.
The deal would also allow the two companies to link GTE's national fiber
optic network with Bell Atlantic's Fiber Optic Link around the Globe, or
FLAG, analysts said. GTE's data business would accelerate Bell Atlantic's
efforts to build its own data network.
"Competition is one piece. Another piece is their own growth rate. Together
they can do more and grow faster. The transition of customers from (a)
voice-only world to (a) packet data world is changing the business," said
William Vogel, a telecommunications analyst with NationsBanc Montgomery
Securities.
Over the past nine months, the U.S. telecommunications industry has seen
two Baby Bells, Ameritech Corp. and SBC Communications Inc., agree to merge
in a $61 billion deal. Industry upstart WorldCom Inc. made a surprise $37
billion bid for MCI Communications Corp., wrestling the long-distance
carrier away from BT.
AT&T also announced two deals to buy Teleport Communications Group Inc.,
which provides local telephone service to businesses, and
Tele-Communications Inc., a huge cable television operator.
"There are these big, grand old telephone companies that are reinventing
themselves. The new emerging companies that have the network of today are
looking for the customers and traffic," Kagan said.
The merger frenzy has led to a strong run in telecommunications stocks,
pushing the American Stock Exchange's North American Telecom Stock index up
30 percent this year, compared with an 18 percent for the Standard & Poor's
500 index.
The rise in stock prices gives each company a stronger currency with which
use in a transaction, but it also makes each potential takeover candidate
more expensive.
Still, analysts don't expect the merger rush to quiet down any time soon.
Companies such as BellSouth Corp., and emerging companies such as Qwest
Communications International Inc. and Level 3 Communications Inc. are seen
as potential takeover targets.
As AT&T shifts its international strategy away from its largely
unsuccessful WorldPartners and Unisource alliances to work with BT, some of
those foreign carriers may look for new allies in the United States.
Strong foreign carriers such as Nippon Telegraph & Telephone Corp. of Japan
may also be attractive partners for U.S. companies.
"I would bet Bernie is brushing up his Japanese, and Bill Esrey, too,"
said Briere, referring to WorldCom Chief Executive Bernie Ebbers and
Sprint Chairman Bill Esrey. |
