• United States

No good news from AT&T

Jan 27, 20033 mins
AT&TInternet Service ProvidersNetworking

* AT&T has failed to cash in on WorldCom's troubles

AT&T last week announced its fourth quarter and year-end financials. While financial analysts noted consumer revenue wasn’t as bad as they had expected, most seemed to be surprised by the continuing decline in the carrier’s business services division.

AT&T’s business service revenue fell 3% in the fourth quarter to $6.6 billion, and declined 4.1% for the year to total $26.6 billion in revenue. Revenue for all of AT&T for 2002 were $37.8 billion compared to $42.2 billion in 2001.

AT&T talked much about a “flight to quality” and for that matter, a stable name in telecommunications, when its chief competitor WorldCom filed for bankruptcy last year. What’s old news at this point is that WorldCom not only filed for bankruptcy protection, but is still tangled in an Securities and Exchange Commission investigation that led to the arrest of a handful of former WorldCom executives.

AT&T clearly hasn’t been able to cash in on its competitors unfortunate financial turmoil. Perhaps that’s not really AT&T’s fault, but the nature of buying right now.

The fact is that if a user has a contract with WorldCom, Sprint or any other carrier for that matter, they have to wait for those contracts to expire before switching service providers. If they try to get out of those contracts before they expire users will pay hefty termination fees. And who really has extra cash in their budget these days?

But AT&T’s window of opportunity to win over WorldCom customers may be closing.

With a new management team in place and the possibility that WorldCom may emerge from bankruptcy debt free sometime this year, customers may not be as worried about staying with the carrier.

Perhaps AT&T was not aggressive enough in trying to win new business. Perhaps it should have gotten into price wars and offered users competitive incentives so customers turn to AT&T when their WorldCom contracts expire. But as business service revenue decline around the telecommunications industry, perhaps AT&T is just in the same boat as all of its competitors.

Many business users have taken a wait and see approach. Not that they don’t have money in their budget for new projects, but as volatile as the market has been, they may be putting new network plans on hold until things settle down. Conservative network investing seems most prudent for many users.

Future quarters will prove whether AT&T made any inroads with new business customers. Developing new relationships take time, especially in a depressed economy. But the fact is, Wall Street expected AT&T to post smaller declines in business service revenue than it did.