Waiting for a Suitor to call?

AT&T and MCI are shopping for suitors as their sales continue to fall. The problem is that nobody is buying. Does this means bankruptcy? Probably not. We believe that the IXC market is collapsing as the first step in a logical market contraction that will (if unchecked) leave the LECs (SBC, BellSouth, Verizon and Qwest) dominating the market with no effective competition. Possible merger candidates are also not appearing, which we believe is part of a strategy (by potential suitors) to drive acquisition prices lower. Certainly the LECs are not eager to move because they benefit from the collapse of the IXCs anyway. Foreign carriers have little to gain by moving into North America (anyone remember Global One or Concert?), so users should not expect foreign acquisition of AT&T or MCI to occur anytime soon. Also, the Committee on Foreign Investment in the United States ("CFIUS") would likely not approve foreign ownership of a major communications network in the middle of the "war against terrorism."

The best user strategy is to hold tight for the time being, monitoring the carriers financial condition closely. Since there is no clear alternative on the horizon, expect it to get worse and plan for it.

AT&T, MCI May Be Cheap, But No One Buying