VARs Concerned About Possible SBC-AT&T Deal

Emmet Tydings, president of AB&T Telecom, a master agent in Gaithersburg, Md., said he is concerned that the deal could throw his relationship with ACC Business, the AT&T channel sub-brand, in jeopardy.

"SBC is not known to most of the master agents," Tydings said. Generally, RBOC agent programs are more stringent and accept fewer partners than those of IXCs such as AT&T, Sprint and MCI, he said.

Quy Nguyen, CEO of Allyance Communications, Irvine, Calif., said mergers and acquisitions always cause "hiccups" in channel business. However, the confusion gives partners an opportunity to work more closely with customers to allay concerns about how changes may affect them, he added.

Published reports Thursday revealed that AT&T and SBC were in talks for SBC, a local telecom company in 13 states, to purchase the long-distance carrier for at least $15 billion. Neither company would comment publicly, but solution providers CRN spoke with also heard reports of the plans.

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The deal would mark the end of Bedminster, N.J.-based AT&T, whose breakup 21 years ago led to the creation of SBC and other Baby Bells.

If it indeed goes down, the SBC/AT&T deal would be the latest in a string of recent telecom mergers, and certainly won't be the last, solution providers said.

"You're going to see a lot more consolidation this year," Nguyen said.

Late last year SBC's wireless unit Cingular bought AT&T Wireless for $41 billion. Last month Sprint and Nextel announced they would merge in a $35 billion deal.

Neither San Antonio, Texas-based SBC nor AT&T has a stellar reputation with the channel, and both companies have faced recent challenges to their channel programs, solution providers said.

AT&T, in particular, infuriated agents last year when it changed compensation plans and cancelled more than 500 agent contracts, a move partners saw as a way to make it more attractive for purchase.

One change in AT&T's agent program was a clause saying should another company buy AT&T, the acquirer has the right to cancel agent contracts, partners said.

Steve Moody, an executive vice president and general manager of the telecom practice for Solarcom, a Norcross, Ga.-based VAR, said that with all the consolidation activity, agents must be careful when they sign contracts with carriers.

"It's important to put thought into and investigate who you are going to build your realtionships with, because when merges and acquisitions happen, you could be at risk to lose the investment you've put into that [carrier]," Moody said.

One large AT&T reseller in the South, who asked not to be named, characterized the possible SBC/AT&T deal as taking "two [channel] problems and putting them together."

The VAR said SBC has been struggling with the various channel programs of companies it acquired to become the industry's second-largest telecom provider, after Verizon.

"If [SBC is] smart they will hire someone to come in and manage their channels [after the merger]," he said.

The AT&T/SBC deal does make sense for both companies from a business standpoint, solution providers said. AT&T has been on the market for some time, having seen its core long-distance business bottom out over the past several years. In 2003 BellSouth was in talks with AT&T to purchase the carrier.

For its part, SBC has been trying to move into markets beyond the 13-state region it currently plays in, with little success, partners said.

One telecom VAR said SBC recently made a failed stab at entering the Atlanta market, and sees AT&T and its national customer base as a way to expand its presence beyond its current regions, which includes Texas, California and other Western states.

"This may be a way for them to get their national footprint through acquisition," said the solution provider, who asked not to be named.

SBC stock was down 91 cents at the end of trading Thursday, while AT&T's rose $1.15.