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Summary:

Earlier this fall, both AT&T and MCI announced billions of dollars in write-offs. They wrote down network equipment assets, indicating that much of their old line TDM gear was useless in an increasingly IP world. AT&T executives have been saying that for months now. Though many […]

Earlier this fall, both AT&T and MCI announced billions of dollars in write-offs. They wrote down network equipment assets, indicating that much of their old line TDM gear was useless in an increasingly IP world. AT&T executives have been saying that for months now. Though many seem to think these write downs are signs that a firehouse sales is coming, others like me disagree. I think AT&T for one, can exist as a smaller, but more nimble company. As I like to argue – sure I want to be 6 feet two and 50 pounds lighter, but that’s not gonna happen. “These asset write downs should have been done years ago,” Allan Tumolillo, COO of Probe Financial Associates says, “allowing both companies to compete with less. IP networking and the services it enables create pricing pressure across the board – in voice, in transport, and in applications. That, and the relentless competitive challenge posed by the RBOCs, have forced both carriers’ hands.” I agree with Allan, and believe that even Baby Bells will be forced to do these large scale write downs, though not in next 12 months. Things have to get desperate for them. “The RBOCs operate two access companies – their landline and their wireless operations – and the combination of these assets generates far less revenue per dollar of net plant than either a pure wireless play like Nextel, or even a weakened long distance carrier like AT&T,” Allan adds. VoIP has brought a new reality to the telecom market, and sooner or later everyone needs to fall in line.

  1. I agree that RBOC writedowns are only a matter of time, not if.

    It should be obvious to the casual observer, because it was obvious to me at least 3 years ago. Also VZ signaled pretty loudly today that they can’t find private buyer for excess wired access lines, so they are going to put some lipstick on them and push that pig into the IPO market. ROTF, Silly bankers will do anything for X-mas bonus.

    But the order of pain in telecom is:
    1) IXC’s
    2) RBOC’s
    3) WSP’s (wireless, for readers in Rio Linda!!!)

    As VZW and Cingular rips out AMPS/TDMA/GSM and transitions to CDMA and W-CDMA, massive erlangs (capacity) will be coming to market.

    I predict we’ll see only two survivors/winners? in wireless: VZW and a merged Nextel/T-Mobile.

    As a point of reference, VZW announced monster operating metrics this morning by growing NetAdds 3x all the other carriers.

    If players are not carefull somebody is going to windup owning a largely empty network, and that’s not the objective.

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  2. Jesse Kopelman Friday, October 29, 2004

    CS, how do you see T-Mobile plus Nextel happening? I haven’t heard that DT is either eager to sell (and Nextel is soon going to fork over a bunch of cash to move to 1900) or buy (and when you buy Nextel you just get customers, thanks to their incompatible network). To me the logical combination is Sprint + Nextel or Verizon + Nextel. I see Sprint as willing to give up waiting on EV-DV and go Flarion with Nextel. As for Verizon, unlike Sprint and T-Mobile their network is good, so they can quickly move users over without worrying about whether they can offer the same service quality. T-Mobile is in the bad position of having nothing to offer but spectrum and low-end customers, neither of which is worth as much as DT paid for it.

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