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  1. Technology
August 21, 1988

THE BABY BELLS DISCOVER EUROPE – 3: PACIFIC TELESIS, SOUTHWESTERN BELL, US WEST

By CBR Staff Writer

The consensus strategy now being adopted by those Bells keen to get a foothold in the European market ahead of 1992 is to forge long term friendships with local partners. National PTTs are naturally favoured allies because of their propensity to hand out lucrative contracts generated by the need to keep abreast of technology in preparation for the 1992 open market. But whoever the target, the maxim for building such friendships remains slow but sure to extract optimum amounts of business. And Pacific Telesis Corp of San Francisco learned this lesson the hard way. Ugly American Sitting pretty on the West Coast, location alone prompted PacTel to look to international territories for extra revenues and it was the first of the fledgling Bells to test its wings abroad after divestiture in 1983. Unfortunately it blundered about foreign continents, falsely believing that it could transplant its US experience in other parts of the world, says Bill zBridgers, principal consultant with Logica, New York, who describes PacBell’s early actions as a classic example of the ugly American abroad. The company confesses that it tried to buy its way into the market through a number of aggressive acquisitions. One of these was Kensington Datacom Ltd, a UK start-up established to offer communications services, principally electronic mail, which it bought in 1984 at a time when the company was scarcely established and was running out of cash. It soon became clear that the outfit, renamed One-to-One after its one product or service, was of little strategic value and would take a long time to reach profitability. PacTel sold the business last year. Early attempts at consultancy were also doomed recalls a company official: Back in 1984, we thought that countries could benefit from our experience at home. That was not true she says. PacTel is reluctant to expound on these early forays in Europe apart from an agreement it made in 1984 with Telefonica de Espana SA, which is the sole survivor of that era. Based on an understanding that PacTel would assist the Spanish national phone company in developing research and development facilities, the project proved general enough to accomodate the Bell’s experience and PacTel is even confident of exporting pieces of the research elsewhere – perhaps to Telefonica’s blood brothers over the sea in Latin America. A coy admission that it is refocussing its efforts to concentrate on specific lines of activity spanning cellular, paging, and trans-atlantic based services is about as far as the company will be drawn on its European activities. It is more forthcoming about its interests in the Pacific Rim, however, an area closer to home and earmarked as the highest priority. A credit card verification project is underway in South Korea for major bank and retail outlets, for example. Ironically PacTel has retreated and adopted a cautious stance just when its siblings on the opposite coast, Nynex and Bell Atlantic are making great strides, having watched and learned from the Californian’s pioneering mistakes. Moreover, it will soon have to compete with the inland Bells, who are now also waking up to the opportunities going in Europe. US West Inc in Englewood, Colorado and Southwestern Bell Corp in St Louis, Missouri have suffered to some extent from the parochialism that has hemmed their neighbour Ameritech into relying solely on the domestic market for income. US West, smallest ranking of the Bells after PacTel – last year its profits totalled just $1,000m – has contented itself with the avowal that the reputation of US West in the international market is definitely going to change. A spokesman conceded that all of last year’s growth came from non-regulated services but would not elaborate on plans to accelerate this trend other than to say that the company is very precious about the progress of agreements with international parties. Southwestern Bell has been somewhat bolder in its declarations and actions, bowled along by a more substantial revenue base: the company posted profits of $1,100m on $8,000

m turnover last year. Its assault on the burgeoning European telecommunications equipment market has been spearheaded by the launch of a UK marketing subsidiary in May, but the operation is expected to expand into other parts of Europe over the next two years. Bread and butter European director at Southwestern Bell Corp Denis Moran forecasts that the bread and butter income of his company will continue to flow from the telephone operating company for some time to come. Domestic complementary activities of telecommunication services, cellular and directory enquiries services are all ripe for export, claims Moran, but he stresses that success will come only by adhering strictly to the philosophy of establishing alliances with individuals. Size of income has never determined the Bells’ inclination to look abroad for extra curricular revenues, although it has driven the pace once the plunge has been taken. The two earlier appraisals showed how BellSouth, biggest in income and spanning the largest land mass has been a lot slower off the mark than Bell Atlantic, which sits midway in the Bell league. Bell Atlantic has a string of alliances with Euro PTTs under its belt and is busy building up a computer leasing empire and US and European third party maintenance business as well. Geography, however, has been the big driving force impacting attitudes. Since AT&T was split up into regional organisations four years ago, the Bells have been given free rein to develop their own policies and the result is a rainbow spectrum of business philosophies. Those on the coasts got a head start in scouring the international arena for pickings but all over the US, AT&T’s offspring are seeking to export their know-how gleaned from four years of deregulation. And with the 1992 open market now in sight, their gaze is now fixed firmly on Europe.

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