AT&T: It’s Alive!

The image “” cannot be displayed, because it contains errors.Like the character from the film Terminator 2: Judgment Day, whose robotic form is reconstituted from disparate liquid-metal components that find each other and recombine, Ma Bell lives breathes and walks again in the new AT&T (12 years after the divestiture).

After the latest round of concessions, the FCC approved the $85+ billion acquisition of BellSouth by AT&T, creating a telecommunications giant. From the WSJ (sub req’d):

The merger creates a behemoth that will have a market capitalization of more than $220 billion — more than twice that of nearest rival Verizon Communications Inc. — and will serve 67.5 million local-phone customers in 22 states, as well as 11.5 million broadband users.

(By contrast Google’s market cap is $140 billion and Microsoft’s is $293 billion.)

The big potential prize for AT&T is TV and the company will pursue that goal aggressively in the months ahead, using its “quadruple play” (TV, Internet, phone and mobile) to try and grab (or retain) customers from cable providers and other rivals.

(Recall that for some time I’ve been arguing that AT&T is in many ways the most logical company to acquire Yahoo! if there is going to be an acquisition. Yahoo!’s market cap is $35 billion. Although on the heels of BellSouth it’s probably much less likely.)

But for the challenge of executing in a giant bureaucratic organization, AT&T is well positioned across a range of industries. While there are any number of options for the new AT&T, let’s focus specifically on local.

AT&T will have a $5.8 billion print directory business [source: Kelsey]) that employs more than 3,500 local sales people. It also owns, which has the potential to be much more effective and user-friendly than it is today. And the company very recently launched 1-800-YellowPages, which could become a very competitive and effective mobile-local search service. (Cingular, soon to become AT&T wireless again, also offers mobile search, etc.) And all this content could equally be distributed via TV/IPTV too under the “” brand.

This all looks very compelling “on paper.” But execution is the key. And we’ll see how much synergy there is and how effectively all these assets come together. In my mind that’s far from certain.


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