Telephone mergers offer varying benefits Rush toward partnerships aims at business service

The Outlook

residential users wait

August 02, 1998|By J. Leffall

MERGERMANIA is sweeping through the telecommunications industry in earnest. Last week, British Telecommunications PLC. and AT&T Corp. reached an agreement for a joint venture in the wake of AT&T's announcement to acquire Tele-Communications Inc. Bell Atlantic Corp., which oversees local phone service from Maine to Virginia, has announced its bid to buy GTE in a stock swap. And there is the pending $62 billion deal for SBC Communications Inc., the product of two Baby Bells, to take over the Midwest's Ameritech Corp.

What does all this consolidation mean for consumers?

Jeffrey L. Pittsburg

Analyst, Goldis-Pittsburg Investment Services, Long Island

It's really a unique situation. You probably end up with half a

dozen information service companies when this is all done. As a company operating in this day and age, you get to the point where all your services need to be -- and can be -- distributed to consumers in an efficient and timely fashion. In order to achieve that, mergers had to happen.

Unfortunately, until the FCC allows local Bells to compete with long distance bells, the competition aspect of this trend is still out to lunch. The consumer will begin to see the fruits of all this but will have to wait 12 to 18 months.

Robert B. Willkes

Analyst, Brown Brothers Harriman, New York

Even without this latest round of media mergers, companies have been attempting to streamline customer services with great care. People have views of what is better and what is not. Generally speaking, customer service is improving.

A lot of focus has traditionally been on business customers. Benefits for residential customers will come a little later in the game.

There will be increased competition. Customers, as we go forward, will have more services if they want them. If they don't want them, then they don't have to take them.

Brian L. Eisenbarth

Telecom analyst, Collins & Co., San Francisco

I think the main motivation for the merger is that the companies are looking for added efficiencies. They are looking for cost-cutting measures. You have people in different organizations doing the same thing. With consolidation, you get better market share from a corporate standpoint.

The focus right now is at the local level. The Internet is popular and the telecom stream is going that way. The market potential for wireless phone service is huge. What benefits the customer is the fact that he or she will have a choice. It boils down to, will a customer pay a certain price or will he or she pay for added services.

It's possible that we could see price increases down the road. When you have a market full of competitors, pricing can be competitive or in the case of the telecom industry, diluted.

Douglas A. Christopher

Telecom analyst, Crowell, Weedon & Co., Los Angeles

The telecommunications industry has been ripe for change for some time and services will improve as companies break into newer ways of doing things. Prices will inevitably rise as services start coming from newer and more sophisticated distribution channels.

Companies are trying to increase their bottom line. AT&T, for instance, is going to have to digest the big price from joint ventures and acquisitions. Their revenue is going to have to come from somewhere, and the base of their revenue comes through consumer services, whether they be business or residential, so price is definitely involved.

It will be interesting to see how the customer is affected by deregulation and consolidation, which might run concurrently.

Pub Date: 8/02/98

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