Welcome Guest. | Log In| Register | Membership Benefits

News In Review

January 12, 1998

AT&T, SBC To Buy Carriers

Multibillion-dollar deals promise full-se rvice packages -- but less competition

By Mary E. Thyfault

T he country's largest long-distance and local carriers criss-crossed into each other's market last week, as AT&T snapped up Teleport Communications Group and SBC Communications agreed to buy Southern New England Telecommunications. The multibillion-dollar deals promise to yield full-service telecom pack- ages for business customers in key markets-but also reduce further the number of major carrier alternatives.

Teleport, which in 1984 was the first carrier to start bringing competitive local telecom services to businesses nationwide, today operates fiber-optic networks in 57 U.S. markets, with networks under construction in nine others. Teleport can also offer local services over wireless networks in 213 geographic areas.

AT &T, like other carriers, wants to offer customers packages of local, long-distance, wireless, and Internet services. Having explored other ways to get into the important local-access market, including reselling services from the Bells, AT&T decided last week to acquire the infrastructure, laying out $11.3 billion in stock for Teleport, in Staten Island, N.Y.

"This gives AT&T a true nationwide local presence," notes Frank Romer, director of telecommunications for the Chicago Board Options Exchange. "But whether it's good for the industry, time will tell."

Berge Ayvazian, an analyst with the Yankee Group Inc., says AT&T is modeling itself after WorldCom, which last year bought Teleport's biggest competitor, MFS Communications, for $14 billion as part of its 10-year acquisition spree. "The only quick way for AT&T to do that is through acquisition, and Teleport is the obvious choice," Ayvazian says.

Cable-TV companies Tele-Communications, Comcast, and Cox Enterprises now own 65% of Teleport and provi de it with infrastructure. Once the AT&T acquisition is final, they will own a combined 10% of the giant carrier and continue to supply infrastructure. Teleport founder and CEO Robert Annunziata will lead a new local-services unit as an AT&T executive VP, reporting to Michael Armstrong, AT&T's CEO of three months.

Meanwhile, Bell company SBC is making its own waves. The San Antonio company, which last year acquired Pacific Telesis Group to become the country's biggest local carrier, last week announced a $4.4 billion deal to acquire Southern New England Telecom, a regional provider of local, long-distance, and wireless services. SBC was instrumental late last year in getting a federal court to overturn a provision of the 1996 Telecommunications Act that kept the Bells out of the long-distance market.

Last week, however, the Department of Justice filed a motion asking that court to hold off on its ruling pending appeals from AT&T, MCI, the FCC, and other parties.


Back to News in Review

Send Us Your Feedback

Top of the Page