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If you think the telecom
sector is boring, just wait. With MCI reemerging from bankruptcy, the Bells
finally getting into hand-to-hand combat, portability taking its toll, and
the cable industry pushing the voice-over-Internet-protocol button, the
telecom sector is going to be very exciting!
MCI's emergence from bankruptcy is going to be one of
the first major shock waves to go through the industry. While MCI could
potentially create a pricing war in the already shrinking consumer land-line
business, the company is also poised to exert serious pressure in the business
services sector. And it won't be alone.
Global Crossing and AboveNet - formerly Metromedia
Fiber Networks - have both emerged from bankruptcy with stronger balance sheets
and big-name backers unwilling to suffer fools.
Throw in companies like the Carl Icahn-backed XO Communications and Level 3 Communications, and you've got a lot
of leaner, meaner companies out there ready to compete.
These companies won't just be competing for customers
either - the battle for users may end up being less vicious than the competition
for assets. This coming year also may finally bring the consolidation that
the industry so desperately needs.
Qwest Communications struck the first blow last week
when it agreed to acquire the assets of bankrupt Allegiance Telecom and thus
extended its service area outside of its region.
Qwest may have to eventually raise its Allegiance bid,
however. There's been a lot of tire-kicking going on, and everyone from Sprint
to Time Warner Telecom is rumored to be interested in Allegiance's assets.
Qwest's run at Allegiance provides proof that the Bells are no longer content
with their regional service areas.
SBC Communications has already announced that it
intends to offer nationwide business services next year, and the massive
BellSouth-AT&T deal - if it ever actually happens - will create the market's
first "national Bell." (Among other things, such a deal could signal a
break-up of Cingular, the wireless provider jointly owned by BellSouth and SBC.)
Meanwhile, Cingular is still looking to snap up either
AT&T Wireless or T-Mobile USA, while Verizon's main goal in 2004 will be to
buy out Vodafone's stake in Verizon Wireless.
Sprint PCS looks like a more attractive takeover
candidate each day; and as push-to-talk becomes more commoditized, Nextel could
find itself with suitors as well.
While consolidation is on everyone's
mind, so is voice over IP (VoIP)
Cable operators such as Comcast, Time Warner and
Cablevision are pushing ahead with VoIP initiatives as part of a land grab to
provide bundled services to consumers. This has forced the Bells into the arms
of satellite television providers, and has also helped third-party high-speed
'Net access providers like Covad Communications become key players in the space.
Who will benefit most from all this activity? It may be
equipment makers like Lucent and Nortel Networks - and, hopefully, the hundreds
of thousands of unemployed telecom workers who need a healthy industry bound for
expansion.
Marking time and jumping fences got the telecom sector
nowhere in 2003. Without being able to define a transparent dream, there was no
growth.
That's all gonna change in 2004. |
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