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  1. Technology
August 11, 1988

THE BABY BELLS DISCOVER EUROPE – 2: AMERITECH, BELL ATLANTIC

By CBR Staff Writer

Operating on their home ground in the US, the regional Bell operating companies are easily recognisable as the same breed. All seven offshoots of AT&T display the same concern to provide local telephony services and can only regard non-core activities as a minor diversion in revenue terms. When it comes to Europe however, where market opportunities are blossoming as deregulation gathers pace, the Baby Bells suddenly develop either spots or stripes according to how urgently they view the need to establish a foothold in the market, or indeed whether they see Europe as an attractive market at all. Discrepancy There is no more striking illustration of this discrepancy than in the stance taken by Bell Atlantic Corp and Ameritech. Both are roughly similar in size in terms of profits, ranking third and fourth respectively in the Bell league, 18 and 20 in the US Fortune 500. But whereas Bell Atlantic has won a reputation as a tenacious diplomat in securing strategic alliances with European PTTs and has expanded its non-regulated activities into its neighbouring continent, Ameritech’s efforts in both these areas is negligible.

Size of revenue clearly plays a role in determining whether a company has sufficient resources to strike out, set up new operations and adapt products to suit the European market. But as the investigation into the European activities of BellSouth and Nynex revealed wealth is by no means the governing factor (CI No 983). Although the biggest of the seven, BellSouth is not the most international in its outlook. The geographical location of the company and attitude of its top executives are all important in dictating the pace of the march across the European continent. As Bill Bridgers, principal consultant for Logica in the US points out, like its neighbour Nynex, Bell Atlantic’s outlook is conditioned by its position on the eastern seaboard where it looks directly across the Atlantic: Europe is a natural gateway for its products and services he affirms. But Bridgers does not believe that the success rate of the Bells in Europe hinges on geographical proximity alone, although this is certainly a contributing factor. A willingness to innovate and tread on risky ground also counts for a lot and these are qualities that do not come easily to the deeply conservative Bells whose culture of caution has been ingrained by years of going by the regulatory book. Bell Atlantic, for example, proudly points out that it was the first of the seven to break down its financial figures to show regulated and non-regulated business, nor is a future breakdown of international revenue impossible, said a spokesman. But even Louis Ross, director of Bell Atlantic’s customer services division concedes that Our history goes back years and decisions are taken in the context of the first yard, not the last couple of inches. So for Ameritech, which spans the traditionally conservative territories of Illinois, Indiana and Ohio, these values go deeper. In Ameritech the structure of the holding company invests all the power into the hands of the telecommunications operating company. The executives here are conservative mid westerners who are reluctant to invest where they can’t see tangible returns says Bridgers. Ameritech has not yet made much of a plunge into Europe, a company official readily admits. To date the plunge has been limited to the acquisition 18 months ago of Applied Data Research Inc, the $173m turnover Princeton, New Jersey IBM systems software developer, which has a spread of offices worldwide. Surprisingly, Ameritech has not yet made any move to export its Centrex technology, an area where it has made a name for itself and one that is currently arousing considerable interest in Europe. The company last year commissioned a major study into the feasability of making an entrance on the worldwide arena but concluded that We have a vast market here…. We decided to concentrate on our home market which includes big cities like Chicago, and host a lot of major corporations recalls a spokesman, who also insists that Am

eritech has not closed the door to Europe.

By contrast Bell Atlantic has devised an international strategy, set up an international division in 1986 and has subsequently made inroads into the European market where it is pitching to the PTTs. One of the trump cards we can bring to the table is that we have faced and gone through the process of deregulation said a spokesman.

Consultancy contracts with half a dozen telephone authorities UK, Switzerland, West Germany, Norway, Holland, Italy and Spain are now bearing more fruit, explained a Bell Atlantic official. Providing consultancy alone for systems integration and software product development – typically operational support systems – has been no mean task, especially given the scale of some of the projects undertaken. Lucrative The operator is in the middle of a project advising British Telecom on the integration of all its corporate systems, for example. But Bell Atlantic is now expecting consultancy work to lead to more lucrative deployment or implementation contracts. An alliance with Telefonica de Espana spawned a contract to implement a management system for the PTT’s telephone network. The deal which will last for at least 15 months and could be extended to 1992, is substantial, although no figure has been named. But Bell Atlantic hopes this will be the first of a string of such contracts to follow on the back of consultancy work, and revealed that a further deal is in the pipeline. Details will be released later in the year and industry sources believe it will be to supply the Netherlands PTT with a similar system. Exporting products and knowledge directly related to its core telecommunications business has been the main force driving Bell Atlantic’s international policy. But it has not been slow to exploit other opportunities that have cropped up. The company recently announced its intentions to establish a European clone of its US maintenance business, Sorbus Inc, using the spread of maintenance interests it acquired from Bell Canada in February as a springboard for growth. Sorbus Europe is expected to become a major plank of the Bell’s customer services division, bringing in half the division’s revenue over the next 12 months. But Bell Atlantic has not been deflected from its key strategy, to make new friends in Europe, a policy that analysts prescribe as a recipe for success.

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