Five years after being hived off from AT&T, the seven US regional Bell operating companies are not just fending for themselves but scrapping with their one-time parent for business – much of it overseas. According to analysts, this new found boldness internationally has not happened before time and blame a legacy of multi-tiered bureaucracy and regulatory restrictons for their earlier reticence. But European manufacturers also need to sharpen up their acts because the Bells are looking across the Atlantic for new deals. And they represent a formidable force. Frustration at continuing restrictions at home,where manufacturing and long distance transmission services are still prohibited activities for the AT&T offspring has been a stimulus for the Baby Bells to seek more of their unregulated revenue from international sources. But the Bell’s predatory instincts have really been awakened by the new possibilities in Europe, where deregulation is sweeping aside traditional barriers to entry. Laggard With the promise of a single market scheduled for 1992, all the regional operators, from the big three – BellSouth, Nynex, and Bell Atlantic – through the sleepier Ameritech and Southwestern Bell to the smaller concerns US West and Pacific Telesis are aware of the options – and are acting, albeit with varying degrees of urgency. Action to date has focussed on consolidating interests strategically through alliances with PTTs and European suppliers although some have made the odd, piecemeal acquisition. New heights of activity were scaled at Telecom ’87 in Geneva when a rash of such alliances were announced, and has not slackened since.
The rate of and strategy for international penetration varies from operator to operator, governed by which of the 22 orphan Bells they inherited when the AT&T monopoly was broken up in 1983. It is no coincidence that Nynex and Pacific Telesis, who have won reputations as aggressive players internationally lie on coastal stretches. By contrast, Blair Pleasance, consultant with the Yankee Group describes the attitude of rural based Southwestern Bell and Ameritech in the mid-west as laggard. BellSouth has the greatest financial clout, ranking nine in the US Fortune 500 which makes it top of the Bell league. Despite having the biggest pot of money to spend in overseas development this has not always been a priority and BellSouth has just recently started to flex its muscles in Europe. BellSouth was born big, spanning the largest number of US states. Today it still leads the seven in total turnover and profits and notched up profits of $1,600m on turnover approaching $12,300m in 1987.
Brian Hailes, BellSouth international marketing director further says that the company aims to grow the BellSouth Enterprises Group, which deals with all non regulatory activities, to become one quarter of the total revenue base over the next five years. BellSouth International will be a critical part of this growth curve, he says, and expects it to be a $3 billion group by the early 1990s. BellSouth is big in mobile communications in the US and dearly wants to export this home grown business. In 1987 it acquired 40% of Air Call Plc, the UK paging service and has taken steps this year to strengthen its cellular interests in preparation for participation in the planned pan-European cellular network. Already partnering the French national broadcasting service GDS in a national paging network, BellSouth also took a 4% holding in the Compagnie Generale Des Eaux consortium which is the second licence holder for cellular. We are now in the process of discussing what role we will play in the network says Hailes. But the company is keen to expand its range of activities particularly into unknown areas where it is currently forbidden to stray in the US. Hailes names value added data services as a strong contender and confirms that high level discussions are underway with a number of financial institutions. A joint study venture undertaken with the Italian PTT has spawned sales of a product called Flexcom which provides e
nhanced use of private networks and is based on development of its own facilities. While BellSouth has set up pockets of enterprise in corners as diverse as Guatemala and India, Hailes is pinning export hopes on the UK and France. These countries are the most critical although other parts of Western Europe such as Spain will prove interesting he reckons, and he is sure that penetration of the European market will progress quicker through local partnerships. But to date the prized alliance with the most liberalised of European phone operators, British Telecom, has eluded the biggest Bell.
Next in line, Nynex, has been much more successful in this respect. Its dialogue with British Telecom has culminated in a major contract to provide consultancy for management of all corporate systems. As the telecoms minder for all the big financial bodies in New York and New England sitting on the coast, Nynex has been a front runner in securing international contracts. An official explained that International strategy is driven by our efforts to meet the communications needs of its multi-national customers – wherever they go. Groundwork entailed talking to numerous PTTs, and Nynex now has a string of agreements under its belt. Nynex International, an independent subsidiary was set up last year and the infrastructure for export is now in place, charged with marketing the entire umbrella of products outside the US and Nynex has labelled mobile, cellular and turnkey solutions as prime export candidates. It has also expressed ambitions of becoming a cellular operator. Nynex acquired the BIS consultancy group in February 1987 and says it is considering other acquisitions. To date, its alliances with Euro PTTs – France, UK and the Netherlands – have focussed on formal information exchange and consultancy work. But a modest staff-swap deal with France Telecom signed back in January 1986 has led to a dedicated high speed digital fax trial. Boldest But the boldest move by Nynex, and one which has still to receive the blessing of Judge Greene, is its bid to hold the US end of the PTAT-1 transatlantic telephone cable to be laid by Cable & Wireless Plc. None of the operators breaks down financial results so it is impossible to say how much revenue each is trawling from the overseas market at present. Given that these sums would anyway represent a tiny fraction of potential earnings, the groundwork that each is laying in terms of establishing strategic realtionships is seen to be more important at this stage. Nynex has so far outstripped BellSouth although the bigger relation is taking action to make up ground by setting specific business targets.
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