AT&T makes its move to gain control of Cingular Wireless

Now that AT&T indeed plans to acquire BellSouth for $67 billion to gain control of Cingular Wireless, what will the impact be on vendors that equip all three carriers?

Now that AT&T indeed plans to acquire BellSouth for $67 billion to gain control of Cingular Wireless, what will the impact be on vendors that equip all three carriers?

Investment firm UBS Warburg recently issued a report on the likely impact of an AT&T/BellSouth union on spending and suppliers. Analyst Nikos Theodosopoulos sees a slightly negative impact on capital spending given the increased purchasing power of a combined AT&T/BellSouth.

Beneficiaries on the equipment side could be Alcatel, Cisco/Scientific-Atlanta and Ciena, whereas Tellabs could see some downside as the FTTC supplier to BellSouth.

“We believe that (BellSouth’s) FTTC plans may be halted or dramatically slowed down and substituted by the FTTN/FTTP architecture” favored by AT&T, Theodosopoulos states. “This would in turn be a negative for (Tellabs) as (BellSouth) is a 10%+ customer and we estimate that FTTC sales to (BellSouth) are approximately 10% of total (Tellabs) sales.”

Alcatel, Cisco/Scientific-Atlanta and Ciena are all “well positioned” at AT&T already, Theodosopoulos states, while “Juniper would be at a slight disadvantage from a merger as Alcatel and (Cisco) are better positioned at (AT&T’s) Lightspeed network.”

Adtran could also benefit as it may be able to expand into BellSouth territory with remote DSLAM and optical access by leveraging the stronger relationship at AT&T, Theodosopoulos notes. Adtran currently sells mostly CO DSLAMs to BellSouth, while it sells both remote terminal and CO DSLAMs to AT&T. It is also expected to ramp up its optical access business at AT&T before doing so at BellSouth.

Other optical beneficiaries could be Corning and ADC Telecommunications, Theodosopoulos notes. AT&T is likely to do more GPON in 2007 and beyond, ramping to about 25% of its network, he states. Corning and ADC are the main passive suppliers into the GPON architecture.

The impact on Nortel and Lucent would be “neutral,” according to Theodosopoulos. Nortel does not have any presence in FTTX or IMS initiatives at Cingular, BellSouth and AT&T, he notes, though the company did just win a substantial piece of Cingular’s UMTS build.

Lucent may slightly benefit from this merger if IMS deployments are accelerated, Theodosopoulos states. Lucent may also be able to drive customer facing synergies as it is involved in all three IMS builds at Cingular, BellSouth and AT&T, he notes.