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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (435)	6/24/1998 11:52:00 PM
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Homepage re: Economic Crisis in East Asia stern.nyu.edu

To: porcupine --''''> who wrote (435)	6/25/1998 9:18:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

Frost & Sullivan's Analysis of the Proposed Merger Between AT&T and TCI MOUNTAIN VIEW, Calif., June 25 /PRNewswire/ -- The proposed merger between AT&T (NYSE: T - news) Corporation and Tele-Communications Inc. (Nasdaq:LBTYA - news; TCI) (Nasdaq: TCOMA - news) is another example of the new dynamics operating in the communications sector. This marriage, to be called AT&T Consumer Services, may finally provide AT&T with a practical solution to entering the local loop. For TCI, such a partner should enable it to survive the fiercely competitive consumer entertainment environment. Growth and innovation are the keys to survival There are two macro-drivers which underlie the telecommunications industry: deregulation and technological advances. Deregulation, typified by the Telecom Act of 1996, lowers the regulatory barriers to entry in the local services market. Technological advances allow newer and better services to be provisioned that more closely respond to incessant consumer demand. Together, these macro drivers enable telecommunications carriers to provide bundled packages of services at lower prices, a critical competitive advantage. One way to take advantage of this situation is to grow large enough to provide attractive service bundles, and be able to have the resources to undercut rivals in the increasingly severe price-based competition for consumers' wallets. A second strategy is to create innovative services which tap into consumers' unmet telecommunications needs. Although some companies have attempted to execute both strategies, notably WorldCom/MCI for the business customer segment, AT&T Consumer Services is the first attempt to attack the residential marketplace. AT&T's invitation to the local market AT&T has long eyed the lucrative residential local market in the hope of being the one-stop ''any distance'' shop for ordinary folks living in Anytown, USA. After unsuccessful attempts at cracking the local market in California, and the inconclusive fixed wireless ''Project Angel,'' AT&T may finally have found the necessary and sufficient tool to bypass the Local Exchange Carriers (LECs). The obvious advantage is that TCI's coaxial cable, in one form or another, passes approximately 33 million US homes. The enormous amount of money and time it would take to construct this level of access makes the buy or build decision easy. The technical capability to provide high quality phone service over coaxial cable, while still regarded skeptically by some in the industry, nonetheless has been shown to be viable. No longer will AT&T be subject to the LECs for local access. Another advantage to AT&T is that TCI's @Home Network, a leading provider of high speed Internet access and Internet content, is a natural complement to AT&T's dial-up WorldNet Internet access service. The attractive proposition to consumers is that they would be able to have far faster Internet access without the delays inherent to dial-up services at a price lower than any dedicated line. TCI gains the power of the top telecommunications brand Although not specific to TCI, the cable industry has typically suffered from poor ratings from the consumer segment, and TCI is often lumped into the stereotype of the ''cable company.'' AT&T, on the other hand, enjoys an extremely high level of brand recognition. In fact, with some segments, AT&T is more readily recognized as their phone company than the actual LEC who sends these customers a monthly bill. A marriage with AT&T would give TCI a measure of confidence in the consumer mind that few other cable companies could match. A less visible, but perhaps more important benefit is the large dowry that AT&T would provide. Cable companies have recently embarked on a program to upgrade their existing coaxial networks and to also lay down fiber optic networks in an effort to keep pace with the incessant demand for bandwidth in all market segments. The financial, technical, and managerial resources that AT&T can bring to bear on these plans would enable the combined companies to make AT&T Consumer Services the most significant force in the US consumer telecommunications services market. But will the relatives approve? As with any proposed merger, the consummation will depend on shareholder and regulatory blessings. On the shareholder side, the marriage represents a promising growth opportunity, given the advantages outlined above. Both companies are expected to contribute to the management of the new provider, and the corporate cultures are similar enough to make the merger work. Frost & Sullivan does not anticipate a problem with the owners. The regulatory blessings, however, are less certain. Certainly the mergers between Bell Atlantic and NYNEX, and SBC and Pacific Telesis were given final approval, but the FCC has demonstrated that it does not rubber stamp all carrier actions. Frost & Sullivan does not suspect any significant objections from the FCC, because a combined AT&T and TCI may be the first real competition to the LECs in the local consumer market. However, it should be noted that Frost & Sullivan feels that the possibility of regulatory approval is less certain than shareholder approval. A match made in heaven To put it all into a nutshell, the AT&T TCI marriage has the potential to be a true benefit to the consumers. Certainly the synergies possible to each of the companies are evident, but above all else, the wedding bells are almost sure to sound like competitive choices in the streets of Anytown, USA. About the author: Dr. Brian Cotton is the Telecommunications Industry Research Manager for Frost & Sullivan, an International Marketing Consulting and Training Firm headquartered in the Silicon Valley. Visit Frost & Sullivan's web site at: frost.com SOURCE: Frost & Sullivan