The next step for AT&T, Verizon

It is no secret that the fortunes of the two largest telcos in the U.S. are now more tethered to wireless than anything
else. Of course, you could say that about a number of other telcos as well. But, in regard to AT&T and Verizon Communications in particular, this notion is made clear not only in the recent quarterly reports of the two companies, in which wireless was the ever-robust primary growth engine, but also in recent acquisitions by both firms.

Verizon recently gained regulatory approval for its acquisition of Alltel, a deal which will give it more than 80 million wireless customers. AT&T this weekend announced it is buying Centennial Communications, a smaller deal, but one that helps AT&T where Alltel helps Verizon--in smaller and rural markets. AT&T also moved to acquire Wi-Fi provider Wayport last week and some weeks ago made several management moves intended to highlight wireless as its primary corporate motivator.

As we see both of the two largest telcos fill out their wireless footprints and strengthen their wireless identities, you have to wonder how far they are willing to go to cast themselves as wireless juggernauts whose ambitions won't be burdened by ongoing landline losses. A smaller telco, Embarq, made the progressive decision earlier this year to outsource wireline voice network management to a vendor partner, Nokia Siemens Networks. How long will it take for AT&T and Verizon to do the same? Make no mistake: If one of them does it, the other will soon follow. Doing so would allow these companies to turn even more of their attention to wireless and mitigate their future investment in traditional wireline voice. It also would help them convince Wall Street that they really are not the same old telephone companies they used to be.

It was once unthinkable that a telco would do such a thing, but when an old business is dying and a new business is thriving, the unthinkable quickly becomes the next and most obvious step to take.

-Dan

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