Sunday, January 30, 2005

Network Implications of SBC + AT&T Merger

SBC Communications confirmed its plans to acquire AT&T in an historic deal valued at approximately $16 billion that is likely to reshape the U.S. telecom market.
The companies expect that the combination of a converged, IP backbone with global scale, a high-density of local broadband access lines, and with a nationwide IP-based UMTS/HSDPA wireless network (Cingular) will be the foundation for truly integrated, next-generation services. The companies cited more than $15 billion in identified short term synergies created through their merger. More than 85% of these synergies are expected to come from cost reductions as the two companies and their multiple networks are consolidated.

From a network perspective, the major impacts of the merger are expected to include:

  • the creation of the largest telecom operator in the U.S. Its assets will include more than a nationwide fiber backbone with more than 77,000 fiber route miles, 750 POPs, network assets in 50 countries and 850 cities, 26 data centers, 52 million local access lines, 5.1 million DSL lines and 77% broadband availability rate in SBC territory, and a 60% share of Cingular wireless.

  • AT&T's IP network will become the backbone for all of SBC's IP services. WilTel currently provides a nationwide IP backbone for SBC. All of SBC's long distance traffic also will be moved onto the AT&T IP network

  • SBC plans to accelerate its move to IP in its local networks, leveraging AT&T's CallVantage platform for offering consumer VoIP

  • SBC's Project Lightspeed will be accelerated. It will leverage the national bandwidth capacity of the AT&T network for its video services

  • All local switches in SBC territory will be upgraded and optimized, while eliminating any duplication

  • The companies will combine and optimize their network centers

  • The companies will consolidate network planning and engineering functions

  • Data centers will be consolidated

  • The companies will rationalize their billing platforms and move to more automated systems

  • The new SBC will use its immense purchasing volumes to negotiate better deals with vendors

  • The two companies' IT organizations will be combined

  • SBC and AT&T's wholesale operations will be combined

  • AT&T's headquarters staff will be merged into SBC. The new headquarters will in San Antonio, Texas

The companies expect the synergies to be above and beyond the efficiency and productivity gains currently being driven by new technologies, such as converged carrier transport networks, VoIP, IP VPNs and Ethernet.

The companies hope to close the merger in 2006, pending regulatory approvals. Neither company foresees any major regulatory obstacle to the deal.
  • In January 2003, WilTel announced a contract to provide SBC Communications with 10 Gbps OC-192c transport for building out its national IP network. The facilities are currently used for IP-based services such as business Internet access, SBC- Yahoo! DSL, SBC-Yahoo! Dial, Virtual Private Networking, Internet Data Centers, and Web Hosting.

  • In October 2004, Cingular Wireless completed its $41 billion acquisition of AT&T Wireless.

See also