AT&T deals with dismantling

AT&T Corp.’s move to break itself into four separate companies began in earnest last week, with some calling the split and surrounding events “the death of an American icon.”

Just as the Basking Ridge, N.J.-based “mega-carrier” was poised to spin off its lucrative wireless business into a separate company last week, cable powerhouse Comcast Corp. made a grab at the AT&T broadband unit. The companies were entering negotiations last week, with AT&T Chairman and CEO Michael Armstrong calling Comcast’s US$44.5 billion bid “serious.”

AT&T is not the only company caught up in transactions. With the financially crippled telecom sector in such a state of flux, corporate customers are beginning to note a general inward preoccupation among their carriers, industry watchers said.

“Companies are taking their eye off the ball in terms of outward activity and are instead spending time looking inside of the company,” said Carr Krueger, a partner at Andersen, a consultancy in Chicago.

To a lesser extent than AT&T, WorldCom Inc. has also found itself in the throes of corporate transactions. The Clinton, Miss.-based company in June broke out a separate stock for its local MCI phone service and more recently hustled to close its purchase of Web hoster Digex Inc.

Further littering the landscape has been a run of service provider bankruptcies and a host of smaller mergers and acquisitions.

These boardroom events have not gone unnoticed or unfelt by the telecom service buyer. A recent Andersen survey turned up a solid link between M&A activity and customer service and satisfaction

And the M&A activity level shows no signs of cooling down, particularly for AT&T. “Right now it is the broadband group [being targeted for acquisition]. Next week, believe it or not, it could be the wireless group. The fact of the matter is that AT&T’s grand strategy just has not materialized,” said Robert Rosenberg, president of Insight Research Corp. in Parsippany, N.J.

Rosenberg said the timing between AT&T’s wireless spin-off and the broadband bid is probably not a coincidence. He believes that the wireless spin-off represents an industrywide “recognition psychologically” that AT&T is no longer a single company.

Late last year, AT&T announced plans to split into four companies covering the wireless, broadband, business, and consumer telephone sectors.

As it turned out, the investor community proved to have precious little patience with AT&T’s ambitious cable plans, Rosenberg said.

“Cable was going to be AT&T’s route into the home and its method for bypassing the local monopoly carriers. But the company was not given more than 18 months before Wall Street started hammering away,” Rosenberg said.

Although embroiled in activity around this split, AT&T’s new strategy dovetails with at least one finding that came out of the Andersen survey: Telecom buyers are not as preoccupied with bundled service as was once thought, Krueger said.

“It’s a bet that AT&T is making. They have bought all of these things in order to offer bundled services on common bills. Now they are moving away from that strategy,” Krueger said.

But one enterprise buyer vouched for the value that some large companies still put on being able to deal with a single carrier.

“Being able to negotiate these things once and put them behind you is a wonderful thing,” said Mason Rotelli, CIO of Communications Supply Inc., in Carols Stream, Ill.

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