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AT&T-BellSouth union stokes user concerns

Mar 13, 20066 mins
AT&TMergers and AcquisitionsNetworking

Customer service, fallout for wireless among issues.

The first reaction by many customers to AT&T’s proposed $67 billion buyout of BellSouth last week was this: Is Ma Bell back? But upon reflection they’ve turned their attention to specific concerns, such as what will become of customer service and the wireless operations and whether the combined carrier’s big footprint will benefit them.

The acquisition, if approved by regulators, would create a $120 billion company with about 317,000 employees, the leading share of business voice and data customers, and 71 million residential phone customers in 22 states. The companies have ample resources in common, including shared ownership of wireless kingpin Cingular and the spending of billions of dollars on fiber buildouts designed to deliver voice, data and video to consumers.

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Although AT&T will have three of the seven Bells under its belt and surpass Verizon to become the largest U.S. carrier, it still won’t be nearly as big as the pre-divesture AT&T, a government-sanctioned monopoly that employed 1 million people.

Still, the new company could be a formidable force for good reasons and bad.

“Anytime there’s a consolidation in the telecom industry it’s not good for the customers, given we have a small number of large players now,” says Dave Dully, CTO at Baptist Health, a Jacksonville, Fla., BellSouth customer.

Others are concerned as well as confused, having barely had time to sort through the AT&T-SBC deal sealed late last year.

“Heads are spinning trying to figure out what this is going to mean,” says Terri Staggs, senior telecom analyst at National Gypsum and president of the Enterprise Networking Technologies Users Association. “I’m located in big BellSouth territory and we have services with them, AT&T, old SBC and Cingular,” she says.

“One of the big things that’s confusing or concerns us is wireless,” she says. “We were very big with AT&T Wireless before AT&T divested the company. We incurred a huge expense upgrading hardware because the devices had to have SIM cards that were recognized on Cingular’s network. The AT&T Wireless and Cingular merger was horrible.”

Staggs says poor communication between the wireless service provider and customers left National Gypsum, a wallboard manufacturer in Charlotte, N.C., concerned that its executives were going to lose international wireless service. This less-than-stellar experience has left Staggs asking: “What other unexpected changes are coming with this merger?”

Wireless is only one piece of the merger that has her concerned. Proposed job cuts and customer contract ownership top her list.

“We already lost our project manager at AT&T with the first round of layoffs post [SBC] merger,” she says. “Who am I going to lose next?”

More than 20,000 jobs were put on the chopping block when AT&T and SBC joined forces. AT&T says about 10,000 BellSouth jobs will vanish.

Aside from personnel issues, Staggs is worried how her contracts will be handled.

“I have a major contract with BellSouth. How will that tie in with my master contract with AT&T? Will I have to redo my master contract? How will they determine discounts? They’re not saying at this point,” Staggs says.

It’s early for AT&T to explain exactly how BellSouth contracts will apply to AT&T’s, but these are issues customers should press the carriers on, according to Phil Redman, a vice president at Gartner.

“Renegotiate contracts for volume discounts based on total spend with all three providers,” he says. BellSouth customers should consider a multicarrier strategy for the next couple of years so they have more flexibility, Redman adds.

Some BellSouth customers welcome the change to a larger provider.

“As a BellSouth customer and an international company, one of the challenges has always been that [BellSouth has been] restricted to the nine-state region,” says Mick Gunter, IT director at Blue Rhino, a propane tank exchange company in Winston-Salem, N.C.

“It’s going to be good for us in being able to support our national footprint better. The telecom industry is in a lot of turmoil and we just hope that we can continue to get good service,” Gunter says. “If there was a concern it’d be to make sure that the service stays good. I’m pretty confident in their ability to take care of it.”

In addition to working with BellSouth, Blue Rhino uses services from Qwest, SBC, Verizon and AT&T. Gunter says he plans to consolidate all of the company’s long-distance traffic onto AT&T’s network, but first he’d like to see how things “pan out.”

Others are as pragmatic. “It was a necessary [move] in terms of the market,” says Bill Moore, telecom manager at the Museum of Modern Art in New York and former president of the now defunct Communications Managers Association. “For a while my phone was ringing constantly with small [competitive local exchange carriers] that couldn’t provide everything I needed. “We prefer to deal with a couple of larger companies that can meet a variety of our needs.”

“The nature of the telecommunications business is such that you have to have a couple of big national companies to provide services that are required these days,” Moore says. “It just goes to show that divestiture probably wasn’t as great of a business idea as it was touted to be.”

Some users comment that AT&T’s acquisition of BellSouth is another step closer to recreating old Ma Bell. But chances are AT&T will never look like it did pre-1984. AT&T had a huge manufacturing arm then called AT&T Networks that spun off in 1995 into what is now known as Lucent Technologies.

Observers don’t anticipate regulators will approve a merger between AT&T and Verizon, though speculation was rampant last week that a Qwest-Verizon deal could happen.

“I’m just waiting to see what Verizon will do next,” Moore says.

Customers, having lived through the bankruptcies of telecom companies large and small in recent years, say they look forward to a more stable financial environment among telecom companies brought about by consolidation.

“While this will provide some more stability in the future, I don’t think it’s right around the corner,” says Jim Giantomenico, CIO at Finlay Fine Jewelry, a New York retailer with sales counters in 963 department stores nationwide. AT&T and BellSouth will be “one of three major telecom players who will be able to offer both wireless and wireline services for seamless access to business applications,” he says.

Giantomenico, like most users, is dealing with his carrier’s merger integration issues. “The Sprint-Nextel and Verizon-MCI mergers are showing some challenges in integration, as well as moving forward on offering new services. AT&T and BellSouth’s deal also “will take some time to get sorted out,” he says.

AT&T says it expects the merger to close in about a year. Industry analysts expect the deal will pass regulatory muster but with some provisions that could include rules regarding ‘Net neutrality.