Can AT&T Regrouping Work?

Yesterday AT&T Corp. (NYSE: T) announced that it is restructuring top management in an effort to "flatten" its notoriously stratified management structure (see AT&T Trims Management Fat). The move has tongues wagging about the carrier's woes -- and possible plans.

AT&T is scrutinizing all management jobs to collapse its structure from a two-division (voice and data) setup into a more unified business. It's starting at the top of the organization, in a winnowing process that's set to continue for several months.

Among the moves announced yesterday are the consolidation of customer service, billing, and product management for both consumer and business services, and the establishment of an overarching sales organization.

Two key execs are retiring: Frank Ianna, president of Network Services, and Ken Sichau, executive VP of sales for Business Services. Chris Rooney, former president of AT&T Government Solutions, is taking over the new sales group. Reed Harrison will head up a unified Network Engineering and Operations group. Barbara Peda, who's held top posts in AT&T's Business and Wholesale Services divisions, is taking over a combined product management group, governing integrated solutions that combine "voice, data, IP, and managed services." Colleen Mullens-Bucholtz will oversee the new customer service group.

Interestingly, none of the new appointees has titles anymore, reflecting a new corporate culture at AT&T -- one in which titles don't matter. That's a far cry from the days when AT&T was accused of carrying scores of middle managers on titles alone.

AT&T is cutting elsewhere than management. It's acknowledged plans to cut 3,500 jobs out of its 70,000-odd roster by the end of 2003. And spokespeople admit even more layoffs may be needed.

With the consolidation and cuts, AT&T is trying to get away from being a dispersed organization -- a legacy of its days as a holding company before selling its wireless and broadband businesses (see AT&T Completes Comcast Merger). New CEO David Dorman, who took charge last November (see AT&T 's Armstrong Era Ending ) is also trying to make his mark.

Analysts question, though, whether the surgery outlined yesterday will be sufficient to alleviate the carrier's list of woes -- which includes alarming weakness in voice services and little evidence of sizeable gains with business customers.

AT&T's voice losses are well documented. In a report last fall, Probe Research Inc. noted that AT&T's consumer revenues dropped nearly 26 percent year over year at the end of the third quarter of 2002, as cellular subscriptions replaced voice extensions and ILECs started invading the carrier's turf (see AT&T Looks for Life After Broadband).

Some see weakness on AT&T's business side, too. Farooq Hussain, general partner with consultancy Network Conceptions LLC, says AT&T hasn't recovered from the collapse of its Concert partnership with British Telecommunications plc (BT) (NYSE: BTY; London: BTA) late in 2001.

AT&T also took a ding, he says, when Global Crossing Holdings Ltd. wrested a huge government contract from its grasp back in 2001 (see Global Crossing Goes to War). Since then, in his view, AT&T hasn't managed to move forward in business services in any big way, despite its claims of doing so. "They've been saying there's lots of gains, but they're not showing up anywhere." The revenues just aren't there, according to Hussain. And there are many small gaps in AT&T's service offerings that shouldn't be there.

"AT&T has not done all they should have," says Sam Greenholtz of Communications Industry Researchers Inc. "So much turmoil -- the reorgs, the spinoffs, the changing of the guard -- worked against actually getting things done."

In some instances, AT&T seems to be cutting back to save costs. Two high-profile network upgrade projects seem to have been canceled or halted (see AT&T DWDM Hope Dwindles and AT&T Shelves Grooming Test), although the carrier's large-scale Multiprotocol Label Switching (MPLS) project (see AT&T’s New Gods) is still in the works.

So what's the prognosis? Some are guardedly optimistic. "Don't forget, AT&T still has a huge customer base of corporations and consumers and one of the strongest brand names in the world. That's a strong foundation to build on," writes Jeff Kagan, an independent telecom analyst, in an email today. But he acknowledges that while "the potential is huge, the proof is in the execution."

Others say AT&T could be trimming down for a merger, possibly with BellSouth Corp. (NYSE: BLS). But that rumor is drawing as much skepticism as belief.

"Anything is possible, but I think Dorman and team are working to build the company under the assumption it will be a going concern," writes Kagan.

"I'm not sure that's in the cards," says F. Drake Johnstone of Davenport & Co. LLC. Still, when asked whether AT&T's regrouping this week will be enough to cut the operating losses in voice, he's blunt: "No, it will not."

— Mary Jander, Senior Editor, Light Reading

PrivateCEO 12/5/2012 | 12:15:15 AM
re: Can AT&T Regrouping Work? More change will be needed, but this is a start. Ianna could only preach AT&T's competitive advantage as being Quality, Quality, Quality while they continued to lose customers due to high prices and old technology.

To get a product thru their ridiculously overstaffed and over engineered approval process was (and remains) an exercise in futility. They are so afraid of approving a product for deployment that might one day fail that they are paralyzed from taking action. They cling to antiquated requirements and study products endlessly while others deploy them and win their customers away. Their requirements add costs with questionable benefit, and their arrogance is legendary. They even charge suppliers up to $2 million to "benefit" from their testing process! To only then delay the program or cancel it altogether. This after the suppliers also spent tens of millions on lab trial systems for AT&T. Many a start-up has been broken on the rocky shores of New Jersey! Only Bobby Max could love this group!

Some recent house cleaning at the Director, Division Manager and VP levels in the product approval group will help, but the old guard was just moved to another organization when they should have been booted out of the company.

T has a long way to go indeed...
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