A report in the Financial Times suggests that equipment makers will bear the brunt of the impact of the AT&T; / Bell South acquisition.
Analysts point out that previous mergers in the US telecoms industry have generally been justified on the basis of cost savings and an overall reduction in capital spending, with a knock-on effect for the equipment makers. “In our view, carrier consolidation is a net negative for equipment vendors,” says Tal Liani, an analyst with Merrill Lynch.
I’m not convinced this generalization applies to this particular instance, nor for that matter, to the Bell Canada / Aliant transaction.
In the case of AT&T; / Bell South, the companies did not really compete against each other. Bell South was a supplier of access services to AT&T; and was a shareholder in Cingular with AT&T.; Bell South had adjacent territory to that held by the SBC component of AT&T.; The transaction will result in better focus for Cingular, driven by a single management vision. Contrast that to uncertainty at the Board level brought by competing viewpoints from the SBC versus Bell South representatives.
Improved focus may permit the integrated company to improve its decision making – releasing more capital faster. It also improves the ability for AT&T; to rollout newer backbone services, knowing that it controls the advanced access capabilities in 33 of its operating states.
Similarly, the Bell transaction should result in increased wireless spending in Atlantic Canada.
Don’t blame reductions in capital spending on these deals!