The US$67 billion stock-swap deal would give AT&T control of four of the seven regional Bell companies that were created after the 1984 breakup of the original AT&T Corp. The new AT&T, which was formed when SBC Communications Inc. bought the remnants of AT&T Corp. last year and took on the latter's name, would also gain full ownership of Cingular Wireless LLC, the top wireless carrier in the U.S.
If the acquisition goes through, AT&T would be able to offer a full set of local, long-distance, wireless and enterprise networking services to users across a broad swath of the Southern and Midwestern U.S., as well as in California and Connecticut.
Some of the IT executives interviewed after the merger was announced said they're concerned that the cost of services could increase as a result of diminished competition.
"There's a possibility that [the industry] will go back into a state like it was in the past, before deregulation," said John Fisher, who until late January was CIO at SmithBucklin Corp. in Chicago. Fisher, who has started a consulting firm called Rethinking IT Inc. in Mount Prospect, Ill., added that if vendors become "the only game in town," they can try to take a different approach with users.
But new technologies such as voice over IP, and potential competition from companies such as Vonage Holdings Corp. and Skype Technologies SA, could make it harder for AT&T to take advantage of its expanded market position, according to Fisher and other IT managers.
The planned acquisition could limit traditional telecommunications options for corporate users, said Rebecca Blalock, CIO at Southern Co., an electric utility in Atlanta. But AT&T and other telecommunications carriers "are living in a world where they aren't the only technology out there," she said. "That's why I'm not as concerned as I might be if there weren't other technologies available."
Southern is "moving fast" to start up some VoIP pilot projects, Blalock said. But she noted that the utility is a big customer of both AT&T and BellSouth and has received solid service from them in the past. Blalock said she was heartened by the fact that her AT&T account representative sent a message about the merger deal to her BlackBerry device early last Monday and followed up with another message assuring her that AT&T would continue a new disaster-recovery initiative between BellSouth and the utility.
Consolidation model
"It's certainly going to be easier for me to deal with one entity than it is to deal with two," Blalock said -- a sentiment that was echoed by other IT executives who are looking to combine various services under a single vendor.
Dan Buchanan, manager of IT at Parker Hannifin Corp.'s O-Seal division in San Diego, said the company as a whole has been moving to consolidate its telecommunications business with AT&T. In addition to giving Parker Hannifin a single point of contact for its telecommunications needs, the strategy is designed to help the company negotiate better pricing by grouping together all of its telecommunications spending, Buchanan said.
"We're dealing with such a large portfolio of services that we can't easily migrate to another supplier, and they know that [at AT&T]," he said. "But they still come to the table and negotiate with us based on the total dollar spend."
Colleen Boothby, an attorney at Levine, Blaszak, Block & Boothby LLP in Washington, said she's concerned that the enterprise telecommunications market is turning into a noncompetitive duopoly between AT&T and Verizon Communications Inc.
Boothby, who represents large companies in negotiations on networking contracts, said via e-mail that she had hoped BellSouth might buy Sprint Nextel Corp. and become "the third leg on the competitive stool." AT&T's planned takeover of BellSouth "makes a problem market much worse," she said. "Duopolies are just breeding grounds for parallel pricing and sluggish performance."
But David Rohde, a consultant at TechCaliber Consulting LLC in Washington, said the planned merger shouldn't raise big concerns for corporate telecommunications managers. As long as Sprint Nextel remains in the enterprise land-line business, corporate users "still have a good, competitive market" to choose from, Rohde said.
Don Gibson, vice president of e-commerce and infrastructure at FedEx Kinko's Office and Print Services Inc. in Dallas, said that he worked for AT&T Corp. in the 1980s, "and it's like it's coming full circle." But Gibson predicted that for corporate users, dealing with the new AT&T in the future "is going to be like it is today, or potentially better."
AT&T's pricing strategy will be watched "very closely" over the next year or two if it succeeds in buying BellSouth, making it harder for the company to try to gouge users, Gibson said. "And hopefully, by having consolidated [operations], their costs will be lower," with the savings then getting passed on to users, he added.
Mitch Betts and Matt Hamblen contributed to this story.