|
Current Issue: September 2007
View from the Top
AT&T Wholesale goes East
Kathryn Morrissey, SVP of AT&T Wholesale, sets her sights on global expansion
by Ken Wieland
AT&T does not make a big noise about its wholesale division. In a 20-page investor briefing report on its 2Q07 financial results, AT&T allocates only two short paragraphs to this part of its business. All they reveal is that AT&T’s wholesale revenues amounted to US$3.5bn in the quarter, a 7.8 percent decline—on a pro forma basis —compared with 2Q06. The revenue drop, notes AT&T, "reflects recent shifts of traffic by major consolidated carriers to their own networks."
Any thoughts that a "mega" AT&T, enlarged by its merger with regional U.S. operator BellSouth, could lead to an increase in wholesale prices for some services are dismissed by Kathryn Morrissey, senior vice president of AT&T Wholesale. "The wholesale market in the U.S. is as competitive as I have ever seen it," she says. "Not only do we have traditional carriers playing in this space but cable operators are also offering voice and data services to their customers."
Despite the SVP job title, Morrissey is in charge of sales for AT&T’s wholesale operations, both in the U.S and internationally. The wholesale division contributes about 12 percent to AT&T’s total revenue (for the six months ended June 30, 2007, AT&T generated sales of US$58.5bn), but, other than this revenue figure (and the fact that revenue is going down on a pro forma basis when BellSouth’s results are factored in) AT&T gives little away about how well (or how badly) its wholesale arm is doing. AT&T does say, however, that it expects quarterly wholesale revenues to stabilize at about US$3.3bn to US$3.4bn during 2008.
As for figures on margins generated by the division as a whole or on individual services, these are not publicly available; neither is there earnings guidance nor geographical breakdown of revenue. "Revenue is skewed towards carriers in the U.S.," concedes Morrissey, but she does not commit on a percentage.
What is clear is that AT&T, and AT&T Wholesale, is expanding its service portfolio. "When I first joined the wholesale division [in 1996], we had only one wholesale service, which was voice," Morrissey says. "Now we offer the full portfolio of AT&T services, including data networking, security, IP and Ethernet."
According to Morrissey, AT&T’s wholesale proposition is unique in the carrier marketplace in that it offers a "truly global" IP MPLS network to meet the connectivity requirements of its customers. "We also realize that there is not a one-size wholesale solution for all customers," she says. "That’s why we have identified distinct vertical segments, which have their own distinct needs. This gives us a competitive edge."
AT&T Wholesale has six customer categories: traditional carriers, ISPs, wireless carriers, cable operators, systems integrators and content providers. There is no revenue breakdown for each group, but Morrissey says the industry is set for "explosive growth" in wireless data traffic (stimulated by increased demand from end users and enterprise customers) and a continued strong uptake in IP-enabled services.
Global go-getter
"A key priority for us is to expand our global capability," Morrissey says. "There is not an economy out there that is not booming."
In March this year, AT&T announced it would invest more than US$750m in its global infrastructure, IP MPLS network and enterprise solutions portfolio during 2007. This investment, double the amount AT&T allocated to global expansion last year, is directed largely at emerging markets and designed to benefit both the company’s wholesale and retail operations.
"The big areas of growth are the Middle East, India, China and Asia," Morrissey says. In the Middle East, AT&T has added network nodes recently in Dubai and Qatar in cooperation with Etisalat and Qtel, respectively; another node is planned for Saudi Arabia by the end of this year in cooperation with STC.
In India, AT&T plans to install two additional nodes by year end, one in Mumbai and one in Bangalore, taking the number of AT&T nodes up to seven. In October 2006, AT&T became the first foreign carrier to secure a long-distance license in India, but Morrissey claims it is too early to say what level of impact the new license will have on the wholesale business. "The potential in India is, however, enormous," Morrissey says. "Around 7 million new mobile subscribers are being added every month, which significantly increases traffic demand. And many MNCs [multinational corporations], of course, have based their off-shoring facilities in India as well."
In China, where AT&T has been active for more than 20 years (it was the first foreign telecom company to establish a Sino-foreign telecom joint venture), it has interconnection agreements with China Telecom and China Netcom. Morrissey says she is looking for "expansion opportunities" in China but would not be drawn on hard detail.
With additional network nodes planned for Vietnam, Pakistan, Malaysia and Morocco, AT&T aims to provide MPLS-based access from 155 countries by the end of this year, up from 137 when the company first announced its US$750m investment plan.
Portfolio push
Catering to what Morrissey sees as exponential growth in content demand, AT&T set up its content provider vertical segment last year, leading to an expansion in the number of data centers AT&T operates worldwide. That number now stands at 36 after new installations in the UK, Arizona, New Jersey, Virginia and Canada.
"If you look at the likes of YouTube and the number of video downloads per day [more than 100 million], there are huge bandwidth requirements," Morrissey says. "We’re also seeing a shift in traffic patterns, with much more content moving from Asia."
A recent FCC ruling allowing AT&T to negotiate individual OPT-E-MAN (optical Ethernet metropolitan area network) service arrangements in areas where it has received Phase 1 pricing flexibility has given the company’s wholesale Ethernet offering a boost. Now AT&T can interconnect with wholesale customers’ SONET infrastructures to provide 150Mbps and 600Mbps CIR (committed information rate), a service it launched last July.
Yet service breadth and expansive global reach are assertions made by AT&T’s direct competitors, such as Verizon, BT and Orange. What makes Morrissey think AT&T really has an edge? "We have a global IP-based network with assets and resources that are widely regarded as unsurpassed, combined with an extensive U.S. network and vertical sector expertise," she says.
As always, the market will decide whether Morrissey is right.
Click here for complete coverage of Broadband World Forum Europe.
|
