SBC-AT&T, Verizon-MCI mergers could result in end to price wars

news
Feb 15, 20052 mins

The two recent telecom mergers could leave enterprise customers at a disadvantage when it comes to the price they pay for services, but there could also be opportunities for customers who can act quickly.

With yesterday’s announcement that Verizon intends to acquire MCI for $6.7 billion, and that coming on the heels of SBC plunking down $16 billion to swallow AT&T, it appears the era of pricing wars may be drawing to a close, The New York Times reported this morning.

The mergers are still contingent upon FCC approval, of course, but presuming both mergers go through and the number of telecom providers decreases accordingly, corporate customers will no longer have the advantage of being able to shop around among multiple services providers competing for their business.

The mergers could, however, create some pricing advantages in the short-term, as Grant Gross of the IDG News Service pointed out yesterday in his article Verizon-MCI deal: New era of telecom giants. Gross included in his story some advice from Pete Wilson, executive vice president of Telwares Communications, a firm that advises enterprises on telecom contracts. Wilson pointed out that “businesses with telecom contracts expiring in the next year may have a window of opportunity to negotiate low rates before the SBC and Verizon deals win government approval.”

Pricing is not the only change business customers should expect, as Gross reported: The two recent mergers point to a future where giant telecom carriers offer a wide range of services to a wide range of customers — from phone, television and Internet service for individual customers to huge long-distance and data networks deployed at the world’s largest enterprise businesses.

In other words, the menu that telecom providers put on the table will expand, but the prices next to each item likely will as well.

N.B. We have ongoing coverage of the telecom mergers in an online Special Report Telecom merger mania.