The Real Reason SBC Wants AT&T

Wall Street Journal sums it up pretty much in its profile of SBC Communications why it so desperately wants AT&T.

SBC has trouble being taken seriously by the phone industry’s most lucrative customers: big corporations who spend millions of dollars on phone and data services. SBC has a relatively small sales force. More importantly, it lacks a global network of its own to carry exploding amounts of data around the world. Many businesses demand that, because they want to operate the same technology at branch offices in Singapore or Cincinnati.

SBC’s business related sales are $12.9 billion, about 45% less than AT&T’s $22.6 billion. Elsewhere, The Journal’s three telecom musketeers – Dennis Berman, Jesse Drucket and Alamar Latour (I have become a big fan of theirs) – say that the deal could face some hurdles mostly in Europe.

Others believe that this could become the catalyst for a rapid consolidation of the U.S. telecom industry.

“Despite AT&T’s assertions that it intends to ‘re-define’ itself as a data communications company, it had little chance of long-term success,” said Allan Tumolillo, COO of Probe Financial Associates, Inc. “This merger, if it does go forward, would rescue AT&T – and its shareholders – from further loss in value. SBC views AT&T as a way of jump-starting its efforts to get into the Enterprise market with something more than local access services. AT&T is a major player in the U.S. and global Enterprise networking business and SBC plays only a bit part.”

In addition, Verizon could jump into the action and make a run for AT&T and if it fails, buy MCI. There is speculation that SBC could take over both Qwest and BellSouth. This would line up the two giants against each other. Of course, the wireline business of Sprint could combine with Qwest and AllTel and become a viable player as well.