AT&T, MCI, Sprint To Battle In Enterprise Telecom Market

With many corporate contracts up for grab, companies may find a short-term window in which to pressure AT&T and MCI on pricing and discounts.

W. David Gardner, Contributor

February 15, 2005

2 Min Read

With as much as half of enterprise-telecommunications customer contracts coming up for renewal in the next year--and with customers dealing with the uncertainty of the AT&T and MCI acquisitions--Sprint is in the best position to take advantage of the upheaval in the enterprise marketplace.

That, at any rate, is the opinion of Pete Wilson, president of telecommunications consultancy Telwares. "AT&T and SBC remain separate companies and will be for at least one year, as they go through due diligence and governmental approvals," Wilson said in an e-mail interview. "Customers may be more skittish to do business with AT&T given [its] new lame-duck status, or they maybe concerned about SBC taking over eventually.

"The inclusion of unique provisions in contracts, such as Discontinuance of Services, Change of Control, Service Degradation, and Account Support all become fair game when negotiating contracts with AT&T."

AT&T is being acquired by SBC Communications, and MCI is being acquired by Verizon Communications. Sprint, too, is involved in an acquisition, as it absorbs Nextel Communications, but Sprint's nationwide fiber network and landline customer base remains free of acquisition turmoil.

AT&T has long had the most extensive network serving enterprise customers, with MCI's business offerings usually ranked about one-half the size of AT&T's; Sprint is in the third position. Wilson, a former Sprint executive, said: "Sprint has no such public [acquisition-related] worries and can rightfully say they are the most stable of all three companies."

As precedent, Wilson noted that MCI had to be more flexible while it was in bankruptcy and he believes drawn-out acquisition processes will cause enterprise customers to exert similar pressure on AT&T and MCI over the next several months.

Once the turmoil in the market settles down, however, Wilson believes a more application- and IP-driven telecommunications and telephony landscape will develop. "Once it runs its course," he said, "longer term consolidation will bring an end to price wars and a cessation of [the] year-over-year write-down of rates for enterprises."

In another development with overtones of anticlimax, Verizon and MCI formally announced the acquisition Tuesday--more than a week after the action began to be reported in the press. Details of the acquisition have been scrutinized and reported on at length, including the news that MCI president and CEO Michael Capellas won't stay with Verizon for long.

In a statement Tuesday, the two firms said: "The transaction will . . . mean better service for enterprise customers by enhancing Verizon's ability to compete for and serve large-business and government customers with a complete range of services, including wireless and the most sophisticated IP-based services."

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