Wednesday, December 12, 2007

at&t Renegotiates Yahoo Deal

at&t says it is close to renegotiating a contract with Yahoo Inc. that undoubtedly will result in Yahoo earning less money. Under the current deal, Yahoo earns as much as $250 million a year of revenue. The renegotiation is expected to affect other deals Yahoo has with other telecom service providers.

The renegotiation is a reminder: large telcos often partner with other entities when entering a new market, and sometimes move slowly in those markets. That doesn't mean the relationships are stable. Ultimately, as they acquire the skills they believe they need, and scale, some partners aren't so important and "value" moves back inside the service provider organization.

There sometimes is a perception by outsiders that telcos are too "dumb" or "too slow moving" to dominate new markets. On the contrary, telcos are big enough, and smart enough, to wait for markets to develop before making a move to dominate. It's a business strategy, not an indication of "not getting it."

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