Prepare for merger, Gartner tells AT&T customers

AT&T customers are preparing themselves in the event the telecommunications provider merges with another carrier - a possibility...

AT&T customers are preparing themselves in the event the telecommunications provider merges with another carrier - a possibility mooted at this week's Gartner Symposium ITxpo 2003.

One of the customers keeping an eye on that merger talk is Atlanta-based Internap Network Services, which has a national overlay backbone for internet services provided by AT&T and has tried to insulate itself by providing redundancy with eight additional backbones from other carriers. 

"We did that because we didn't want all our eggs in one basket," said Jeff Hacker, national manager of alliance development at Internap. 

The suitor mentioned most often for AT&T is BellSouth, according to Gartner analyst Jay Pultz. He put the odds of an AT&T merger with another carrier at 40% over the next few years, based on several factors, including an expected consolidation in the telecommunications industry. 

Neither AT&T nor BellSouth would comment on the possibility. "That AT&T/BellSouth merger possibility has come up in waves over the past three years, but it's not something we talk about," said BellSouth spokesman Todd Smith. 

Giving credence to the idea is the fact that revenues at AT&T and other carriers have fallen in the past two years, even as the number of customers has grown, creating a market ripe for consolidation, said Gartner analyst Tim Smith. 

AT&T Tuesday reported a revenue loss in its third quarter, although income for the period was higher. 

With merger talk prominent, analysts advised customers to renegotiate their long-term contracts to give them more options. "Customers need to be able to say, 'I don't like this new partner, and I don't think you'll follow your earlier strategy'," Pultz said. 

Following the analysts' presentation, several AT&T customers said they feared a combined entity could move in directions that could be adverse to their existing internal network plans. They might be right, Pultz said, noting that past mergers have led to technology shifts customers were unable to predict. 

Company Knowledge Learning recently chose AT&T as its principal voice and data service provider for nationwide services for 25,000 workers. Matthew Mitchell, vice president of information services, said he is alert to news about AT&T, but feels the multimillion-dollar deal Knowledge signed with the company will still be good even if a merger takes place.

One reason, he said, is that "any merger would take two to three years" to have a full effect. Knowledge Learning chose AT&T because it had both long-distance and local voice and data services, with plans for local services that other long-distance carriers could not match, Mitchell said. 

Pultz said AT&T has lately set up a number of initiatives that should be attractive to customers, including a plan to consolidate its network technologies and improve customer service by speeding up the time needed to provision new services and respond to complaints.

Matt Hamblen writes for Computerworld

Read more on IT strategy