Why SBC buying AT&T makes sense to me

Today's New York Times reports that SBC is in talks to acquire AT&T. The price tag for such a transaction is said to be more than $16 billion.

Today's New York Times reports that SBC is in talks to acquire AT&T. The price tag for such a transaction is said to be more than $16 billion.

Although I haven't parsed out the financials, I see a technology fit between the services SBC would like to offer, and AT&T's existing structure for making those services possible.

In November 2004, SBC announced that in the first quarter of this year, it would begin construction on Project Lightspeed. The company defines the goal of Project Lightspeed as "an advanced, IP-based (Internet Protocol) network capable of delivering a rich array of integrated next-generation television, data and voice services substantially beyond what is available from today's telephone, cable or satellite TV providers."

As far as VoIP is concerned, a bulked-up SBC, strengthened by the acquisition of AT&Ts existing telecommunications infrastructure, would be in a great place to offer VoIP and other services to its more than 50 million existing local-line customers.

Now let us look at the whole matter of infrastructure.

SBC estimates the cost of fiber-based Project Lightspeed at around $4 billion.

AT&T, as the Times article points out, already "has the largest international fiber network." And, as we point out, AT&T already has the infrastructure in place to deliver a range of VoIP services for homes and businesses.

AT&T is at a disadvantage in PSTN long-distance, because they are losing customers to cellular providers such as Cingular. AT&T spun off their cellular operations years ago as AT&T Wireless. Now, ironically, AT&T Wireless has been acquired by Cingular, which SBC is part owner of.

The bottom line then, is I see a technology fit between:

SBC's services goals and its looming capital expenditures, necessary to achieve those goals, and;

AT&T's existing and impressive technology infrastructure, and its need to maximize that infrastructure as a hedge against its competitive weaknesses.

Agree with my assessment? Post a TalkBack.

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