telecom merger makes you kind of miss Ma
By Jon Talton, Columnist
Thursday, March 16, 2006
AT&T's proposed $67 billion acquisition of BellSouth
provoked a moment of worry in the zombie America of
work-drive-shop-sleep: that the deal would revive the old
Bell System, broken up by the government in 1984.
The reality will be far different. The new AT&T will have
some of the vices and none of the virtues of the old Ma
Bell. It will likely be imperious and unresponsive in its
service areas, especially for local phone service. But it
will not be a reliable, one-stop national network like the
old AT&T, nor will it have the safe profit stream to provide
secure jobs or the breakthroughs of the old Bell Labs.
The new AT&T is really one of the old Ma Bell's babies, spun
off as regional phone-operating companies in 1984.
Southwestern Bell became SBC Communications and acquired
Pacific Telesis, another Baby Bell. When SBC bought what
was left of the old AT&T, after years of mismanagement had
wrecked that proud American blue chip, the San Antonio-based
company changed its name to AT&T.
Still with me?
If the bogeywoman of Ma Bell is bogus, it doesn't mean the
deal is without flaws. Soon after it was announced, SBC
officials kowtowed before Wall Street to promise 10,000 jobs
would be cut. If the stock doesn't do well, and I mean
pronto, baby, then more job cuts will follow, many more.
Make no mistake: This merger is all about Wall Street.
Most mergers fail to deliver benefits to either shareholders
or customers, much less to employees. But they produce big
payoffs to the investment bankers and lawyers that handle
the deals. Goldman Sachs and Lehman Brothers have announced
record profits in an economy where most people are barely
keeping even with inflation.
The executive class that runs most big companies today is
happy to play along. For example, in Capital One's $14.6
billion acquisition of North Fork, the acquired company's
CEO gets a $185 million payout. Beats working.
Proponents of the SBC deal say the bigger company will be
more innovative. Where will they get the money? There's a
reason why the United States is behind other leading
industrial nations in broadband, despite all our vaunted
competition. Broadband is basic to an entire new generation
of products and services.
Again, this is Wall Street's deal, and its expectations are
for superior profit margins. That requires a manic focus
on short-term results, often at the expense of such "frills"
as research and development. This is especially true in the
telecommunications sector, where investors have been
repeatedly disappointed. It will take an unusually
disciplined company leadership to resist those pressures.
No doubt antitrust regulators will wave through the deal.
One wonders what kind of combination nowadays would cause
the government to stand for the public interest. John D.
Rockefeller? The intergalactic Borg?
Even though the two companies don't overlap much in
traditional terms, the merger does take away competition for
the highest-end innovations and services. And it will be a
blow to the stewardship of BellSouth in its headquarters
city of Atlanta.
I'm still waiting for the benefits of the telecommunications
deregulation act of 1996. Near-monopoly power continues in
most areas. Hundreds of thousands have lost their jobs.
Makes me almost miss the old Ma Bell.
Reach Talton at
Read Talton's daily blog at