AT&T: Telecom consolidation 'logical,' inevitable
Summary: "I think it is logical to assume you're going to have two or three and certainly not six and seven competitors in any marketplace," says AT&T CFO John Stephens.
The wireless industry is likely to shrink down to two or three players, roughly half the roster across the U.S. today, according to an AT&T executive.
John Stephens, CFO of AT&T, spoke at a Nomura investment conference on Wednesday. Stephens was asked about consolidation in light of AT&T's failure to acquire T-Mobile. Regulators panned AT&T's T-Mobile acquisition over competitive worries.
Stephens said:
I think it is just logical that the industry is going to consolidate in some form or fashion. I think the marketplace has spoken to that with what it has done to pricing in the valuations on some of the companies. From an economic perspective and a highly CapEx-intensive business, I think it is logical to assume you're going to have two or three and certainly not six and seven competitors in any marketplace. So I think consolidation is logical.
Will the government allow it to happen? They have certainly spoken to us on that as a participant in that from acquiring spectrum and more customers. They spoke to us last year. Whether they will let it go at other levels or at a lower level or smaller deals, we will leave that to the FCC.
The argument from Stephens rhymes with what is usually heard from the airline industry. The theory: There can only be a few players given the high costs. In the wireless industry, spectrum is limited and it's not cheap to build out a network.
However, the wireless industry appears to have some pricing power. Stephens noted that AT&T has been able to tweak its pricing plans and raise its upgrade fees. Verizon also instituted an upgrade fee.
Stephens also talked profit margins:
We are going to grow margins year-over-year. Last year's margins were about 38.5% in wireless and our guidance says we are going to grow. I have said publicly, and some of my peers and coworkers have said publicly we expect we are going to have north of 40% margins this year in our wireless business and still believe that.
Stephens didn't put a timeline on wireless consolidation, but it's hard to argue against the idea. All industries boil down to two or three players eventually. The big question for wireless consolidation is timing. When will get to two or three carriers? And if so will this consolidation lead to price increases or will the mergers occur after wireless services is commoditized?
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Talkback
All industries boil down to two or three players eventually -- poppycock!
I think it is logical...
This is the wet dream of AT&T
It's in consumers' interest to have robust competition, but it is not in the interest of the FCC regulators or the government authorities. Having fewer carriers makes the FCC's job easier and the payoffs (private jobs) more predictable. Also the intelligence and law enforcement agencies want everything to flow through just one or two big pipes that give them a convenient monitoring and choke-point.
When the consumers have one side and business and bureaucrats are lined up on the other, you already know who will lose ...
AT&T: Telecom consolidation 'logical,' inevitable
He is Right and Wrong
Where he is wrong I think is in the direction of consolidation. Consolidation of resource - bandwidth/spectrum is the direction that would provide the most efficient use. A common pool of spectrum for all to source from.
Of course AT&T wants that.
Of course they'd say something like that. It's their wet dream.
"The theory: There can only be a few players given the high costs."
I'd like to see some evidence that this "theory" makes any sense.
"Stephens didn???t put a timeline on wireless consolidation, but it???s hard to argue against the idea."
Hard? How? They're a monopolistic organization making poor excuses for their behavior. They're just repeating what would be in their own best self-interests, and ignoring their customers completely.
"And if so will this consolidation lead to price increases"
You can bet everything on that. And chances are, you'll lose everything to your new phone bill if that happens.
"or will the mergers occur after wireless services is commoditized?"
Monopolies are the anti-commodity. It will [b]reverse[/b] any commoditization that may happen. The very definition of a monopoly is essentially that only one company has control over everything - and thus, they have complete control over whether it's a commodity or not. Which you can bet it will stop being.
There is no "commodity" under a monopoly. The very [b]DEFINITION[/b] of the word is that they have [b]complete control[/b] over the market. Not sure what part of that you don't understand?
"We are going to grow margins year-over-year. Last year???s margins were about 38.5% in wireless and our guidance says we are going to grow. I have said publicly, and some of my peers and coworkers have said publicly we expect we are going to have north of 40% margins this year in our wireless business and still believe that."
SSSLLURP - that's the sound of them vacuuming out your wallet. Enjoy handing them all of your money. Those profit margins come from your wallet, you know. Probably right into the pockets of their shareholders, whose only interest in AT&T is money money money - at the expense of the customers, of course.
Don't you love being unimportant as a customer?
Because with the twisted way the market works right now - you are. You're just a money machine for them. You "need" your phone, and will do anything to get it. You have no power. You're supposed to, but you really don't.
Because you need your phone.
Have fun in this world run by monopolies and shareholders. They don't care if your product is crappy - as long as you pay them. They don't care to give you any customer support - as long as you pay them. They don't care if you're pulling our credit cards to pay them - as long as you pay them. They're free to ignore ideas to improve their products - as long as you pay them. They don't care if their network coverage is spotty - as long as you pay them. They don't care if they're 10 years behind in technology - as long as you pay them.
And pay them you will.
Because you need your phone.
And because there's no other choices.
Because they're a monopoly.
See how it works with a monopoly?
Enjoy.
"You need your phone"
Another rant
Who Has Consolidated
It's a sign that costs of acquiring new business are prohibitive as compared with the savings from having fewer employees.
There's always a hit to customer service and when one starts with a low down reputation, like the phone companies, well, it was hard to think that they could go any but up. I apologize for that last point; what the customers think is a foolish metric.
But, go back and look at my list. Doesn't it seem that the need to consolidate is a warning sign?
none of those examples have only 2 or 3 competitors
AT&T: Telecom consolidation 'logical,' inevitable
welcome back ma bell. it's been a long time!!!
monopoly is a good thing after all... according to at&t.
AT&T Data system collapse