AT&T’s acquisition of BellSouth moves the industry one step closer to its past as competition drives a consolidation cycle that is returning us to the days when the market was dominated by a handful of players.
AT&T divestiture in 1984 created seven holding companies – Nynex, Bell Atlantic, BellSouth, Ameritech, Southwestern Bell, U.S. West and Pacific Telesis – each of which had roughly 100,000 employees. That left AT&T with 400,000 employees and close to $40 billion in revenue.
The parent and offspring were the largest telecom companies of the day serving some 80% of the market, but other prominent carriers included GTE, United Telecom (which would later adopt the name of its long-distance unit, Sprint), LDDS (which would later become WorldCom) and MCI.
Twenty-three years later those 12 companies have been reduced to four:
• Verizon started when Bell Atlantic merged with Nynex in 1997 and then took the name Verizon when it acquired GTE in 2000. In 2005 it bought MCI, which had merged with WorldCom in 1999.
• Qwest, which broke into the long-distance business by laying fiber along railroad tracks, bought U.S. West in 2000.
• Sprint Nextel was formed when Sprint acquired the upstart Nextel wireless carrier in late 2004.
• And the new AT&T, an amalgamation that started when Southwestern Bell Corp. (later called SBC) merged with Pacific Telesis in 1997, acquired Ameritech in 1998, bought AT&T in 2006 and adopted that name, and just now finalized the acquisition of BellSouth.
Most of the consolidation happened in the last 10 years, a time of cataclysmic change. Data volumes passed voice traffic in 1998. By 2001 the number of local access lines fell for the first time since the Depression, a byproduct of the rise of cell phones. By the following year there were more wireless than wired phones in use.
And of course, Internet usage was spreading like a wildfire. While it took 80 years for the telephone to reach 50 million customers, and 15 years for cellular and 10 years for cable TV to reach the same milestone, the Internet achieved that reach in only five years.
The remaining players are competing in a new world where mass matters, mobile is a must and broadband reach is critical.
AT&T is again the big name in town, with estimated annual revenue of $120 billion, followed by Verizon at roughly $93 billion, Sprint Nextel at $42 billion and Qwest at $14 billion.
Now that the dust is settling, let the competition begin.
