Initial Reactions To AT&T's BellSouth Acquisition (T, BLS)

Includes: BLS, CTL, T, VZ
by: SA Editors

Jeff Jarvis on Losing to the Lilliputans: 'AT&T is acquiring Bell South after having combined with SBC and acquiring PacTel, Ameritech, and Southern New England before that. So now it’s AT&T vs. Verizon (which should just change its name to Bell Telephone, for old time’s sake). But consolidation these days — when small is the new big — is about dinosaurs huddling against the cold, about Gulliver losing out to all those damned Lilliputans. Distribution is not king; in fact, it’s a rotten business. Content is not king; hear the whining from that end of the world. The scarcity economy is over. Openness kills monopolies. Don’t congratulate AT&T. Pity them.'

NYT on executive compensation: 'With the deal, Duane Ackerman, the chairman of BellSouth, and several of his top lieutenants stand to collect hefty special payments, according to the terms of their employment contracts. Mr. Ackerman, who 63 years old and nearing retirement, could sell $28,374,000 worth of restricted stock and options if he is asked to leave the company, according to publicly filed documents.'

Om Malik on consumer opposition: 'The merger will likely get a lot of opposition from the consumer groups. Gigi B. Sohn, president of Public Knowledge, in a statement today noted that we need to make sure that Net Neutrality is part of the approval process:

Both AT&T and BellSouth have been forthright in their statements about their desire to exert greater control over the Internet. It is up to those who make public policy to make certain that the principles of an open Internet continue through this greater consolidation of the telecommunications industry. It is vitally important that the Internet remains open and accessible to consumers and to service providers and remains the source of innovation it has been over the past two decades.'

Mark Evans on competitive impact: 'So what does it mean from a competitive standpoint? It certainly sets the stage for an even more consolidation in the industry as Qwest could become the next (and last) big carrier to fall. It will also create an even more fierce carrier-cable war as they wage the "Battle of the Bundle" for consumers. Perhaps it will prompt some consolidation in the cable industry if some cablecos start to believe they need to become even bigger to compete effectively with the carriers. The deal will also have an impact on the already-fragile telecom equipment market as yet another large customer gets taken out of the picture.'

Jeff Kagan on implication for cable: 'They are gearing up to fight new competitors, the cable television industry, for the complete bundle of services including telephone, television, wireless and Internet. AT&T is getting ready to roll out their television service on a nationwide basis. This is much more advanced than traditional television. Customers for example can watch four channels at one time. This is sending companies like Comcast and the other cable television companies back to the drawing board to offer a better combination of services.'

Aryeh Bourkoff from UBS on implications for satellite (from LightReading): "We believe that this announcement is fundamentally more of a positive for EchoStar, while somewhat negative for DirecTV," Bourkoff writes in his Sunday note to clients. He points out that EchoStar Communications Corp.'s DISH Network has a deal with AT&T, while BellSouth -– along with Verizon and Qwest Communications International Inc. –- have deals with DirecTV...

Bourkoff writes that as many as "50% of DTV's [DirecTV's] net sub adds over the next 3 years are estimated to originate from the Telco partnerships." He adds, "We believe there could be downside pressure to DTV sub growth targets, in the likely event that the BLS/DTV migrates to the broader AT&T/DISH deal."

CNNMoney on effect on the markets: 'Telecom stocks rallied in European markets in early Monday, despite protests by two U.S. consumer groups and concerns about whether regulators would eventually approve the deal. Shares of AT&T were down more than three percent in Europe. "Telecom stocks should get plenty of attention on Wall Street. BellSouth could get a competing bid and we're probably going to see more deals as consolidation in the telecom industry continues," Art Hogan, chief market strategist with Jeffries & Co., told'

Techdirt on Net Neutrality: 'Consumer groups are saying they'll oppose the deal, but it's unlikely that will matter. The request by one group that the combined company sell off Cingular (which is already jointly owned by the two companies) seems like a pointless suggestion that really doesn't impact the competitive issue at all. If these groups really are concerned about competitive issues, they'd focus on network neutrality issues -- as the combined company (both parts of which have advocated ditching net neutrality) would be in a position of power when it came to offering broadband services to large parts of the country where little real competition exists.'

WSJ on Verizon's next steps: 'Now may be the time for Vodafone to accept Verizon's overtures: Just last month the U.K. wireless giant forecast slower revenue growth and tighter profit margins for its fiscal year ending March 31, 2007. Vodafone's American depositary receipts, which traded above $26 as recently as November, were at $21 Friday in New York Stock Exchange composite trading.

'Another wireless option Verizon could dial up is Alltel Corp., which has a market value of about $25 billion. The company, based in Little Rock, Ark., serves about 10 million customers, mostly in rural areas and small cities, and competes directly with Cingular in many places. Alltel is in the process of splitting off its less-desirable wireline operations in a deal expected to close this summer. But some observers think its customer base isn't attractive to Verizon.'

Moconews on impact on content providers: 'So what does this mean for content providers? AT&T already was the biggest kid on the block; now it will have even more power. Think Comcast in the cable arena. It shouldn’t change life much for the wireless side. But it should significantly increase AT&T’s role in IPTV, with the addition of more potential IPTV households. AT&T will use that to argue for the merger.'

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