Telefónica Weighs Major Investment in BT
Telefónica appears to be angling for a deal giving it 20 percent ownership of BT, while returning O2, the asset formerly representing BT’s mobile business back to BT.
BT got out of the mobile business in 2002, which BT had started in 1985, as a short term measure to shed debt. BT was not the only firm to be forced to do so.
One of the most surprising telecom asset sales of the past couple of decades would seem to be AT&T’s sale of its cable TV assets in 2002 after assembling them in 1998 through 2000, and the spin off of its mobile assets in 2001 (after acquiring the McCaw Cellular business in 1994).
Given the current thinking about the strategic value of high speed access, the dominance of cable-based high speed access, mobility as the growth driver within the broad telecommunications business, and the contribution video entertainment services are making as part of the triple play bundle sold by telcos, the asset dispositions by AT&T an BT might appear to have been untimely, if necessary at the time.
Now there are rumors BT will reacquire O2, its former mobile assets, as AT&T, in one sense, later bought its way back into the mobile business as well.
It is a somewhat convoluted story, but the spun off AT&T mobile assets were acquired by Cingular Wireless, a joint venture between SBC and BellSouth.
After SBC Corp. purchased the former AT&T, and then bought BellSouth, its former partner in Cingular Wireless, Cingular was rebranded AT&T Mobility.
So what’s the story? Sometimes grand strategy can bump into tactical reality. The sudden collapse of the telecom bubble in 2001 was one of those confluences. Both AT&T and BT had to shed assets to reduce debt, and larger strategy had to wait.
|source: Visual Insights|
So barely two to three years after each firm made big decisions to get into or out of a line of business, each firm reversed course. BT became a mobile virtual network operator in the United Kingdom three years after selling its mobile assets.
AT&T made the bigger shift, shedding mobile and also fixed network assets it had intended to use to underpin its voice and high speed access strategies. A few years later, AT&T itself was completely sold to SBC Corp.
But sometimes larger strategy can drive tactical decisions. Telefonica appears to be angling for a broader alliance with BT to bulk up in anticipation of higher competition in the European mobile market. That creates a willing seller to match a willing buyer.
All of that makes sense, though it is ironic that BT and AT&T would divest, and then reacquire, core mobile assets that today drive, or will drive, revenue growth for both firms.