The board of AT&T Corp. on Monday approved a plan to break up the company and spin-off certain businesses, according to published reports which said that the plan will be announced later this week – possibly as early as Wednesday.
According to Tuesday’s New York Times, which cited people close to the company, the board approved a 12 to 24 month timescale for spinning off its cable television and wireless units into separate companies. The report also says that the company will operate its consumer long-distance division as a separate unit, and create a new stock to track it, leaving AT&T’s business services as the core of its new operations.
The Washington Post, which is also reporting that the deal was approved, says that the plan is the brainchild of AT&T CEO. Michael Armstrong, and is designed to boost the company’s depressed stock. But the fact that the split was instigated at the behest of Wall Street has already stirred up a debate on whether it is a good thing for customers that shareholders are calling the shots.
“This says a lot about how much say shareholders have over the operational control of a company,” said Michael Jones, CTO of Flashcom, a Huntington Beach, Calif.-based ISP and AT&T customer. “The balance has clearly swung in the favor of shareholders in the last two years.”
That view was disputed by Ed Minyard, executive vice president and COO at StrategiNet, another AT&T customer, who argued that the split – and the decision-making process behind it – may not be a bad thing for AT&T or its customers.
New York-based StrategiNet in August inked a $100 million deal with the carrier for data, wireless, and voice service. StrategiNet is gearing up to announce an alliance with AT&T to re-market AT&T’s broadband and Internet service.
“Shareholders really should call the shots in a public environment, if a company is being ripped apart in a competitive environment,” Minyard said.
Corporate telecom buyers, in fact, stand to gain from that boardroom decision, he said.
“The real bread and butter for corporations is data,” Minyard said. “I’d rather see (research and development) dollars go to the evolution of advanced services, rather than have the company continue to be dragged down trying to keep up with the Joneses in consumer long-distance.”
Even the notion that pulling apart AT&T means also separating out its bundled offerings does not hold water, Flashcom’s Jones said.
“First off, there is no nirvana out there from a billing standpoint for a customer trying to get integrated services,” Jones said. “There are already certain elements and pieces of the pie that are not integrated for the company looking to outsource.”
Although an AT&T customer, ISP Flashcom also competes to some degree with mega-telecom giants such as AT&T. And in that sense, the split-up is more good news, Jones said.
“This certainly creates some opportunity for ISPs in general,” he said.