What is AT&T's Core Competency?

AT&T apparently has told investors and analysts it would consider selling its tower network: or stakes in America Movil if needed to continue paying its dividend, or buying back stock

Neither type of move--selling towers or selling international assets--would be unprecedented.  T-Mobile USA has done so.

Sprint did the same. Other carriers, such as Saudi-owned PT Axis Telekom Indonesia, have sold off tower networks.

In fact, the sale of tower assets seems to be a global trend.

And lots of service providers have bought out of territory assets, and then sold those assets to raise cash and reduce debt. Most service providers in Europe with out of market assets are thinking about it, or are doing so.

In most cases, such sales are for purposes of reducing debt.

Nor are tower sales, or disposing of international assets, the only steps service providers are taking. VimpelCom has signed a five-year managed services contract with Ericsson that has Ericsson managing network operations on VimpelCom's behalf at more than 10,000 sites.

The deal suggests that network operations are not viewed as a core competency by VimpelCom. It isn’t that the network is unimportant; simply that it is not the unique source of perceived value.

Likewise, Reliance Communications signed a similar deal with Alcatel-Lucent in India. Such developments might have been unthinkable back in the monopoly era of telecommunications, when executives might have argued that network operations were the core competency. The phrase can be misunderstood.

In common usage, a core competency might be understood as “something we do well.” That is not quite what business strategists might mean.

A core competency is a single, specific competence that not only is essential, but offers a key way of differentiating from other contestants in the same market. A core competence therefore is a subtle thing. It is not just “something we do well,” not only the “singular advantage” a company might possess, but a capability that also distinguishes a firm from all others in the same business.

That is what makes a “core competence” hard to pin down. Firms might have key skills in the regulatory area, for example. But other leading firms might also have such skills. That means skill at managing the regulatory process is not a “core competency.”

What is a bit shocking is that “running a network” is no longer seen by every carrier as a “key competence,” much less a core competence. That is not to say the network is unimportant, only that it is not uniquely important.

But such sales also raise the issue of what a telco’s “core competence.” What is the unique capability a tier-one carrier such as AT&T possesses?

It actually is a hard question to answer. Is it marketing, regulatory management, strategic vision, financial  management, scale or something else?

These days, it seems more clear that the answer is quite subtle. Carriers can dispense with towers or even network operations. Few seem willing to part with spectrum or physical access networks. Perhaps that remains key to answering the question of core competence.

Tier-one telcos have to be good at managing all processes relating to acquisition and control of scarce access assets.