For more than two decades, Atlanta enjoyed the benefits of being home to one of the largest regional telephone companies.
BellSouth, created in the 1984 breakup of AT&T, was one of the area’s premier employers, as well as a marquee headquarters in the city. And with Cingular Wireless as a key asset, BellSouth seemed bent on becoming a major player in the mega-billion-dollar market for global telecommunications.
But instead of expanding to rule the telecom world, BellSouth got outpaced, out-maneuvered and finally bought by — who else? — AT&T.
The purchase, consummated five years ago this December, reshaped the telecom world. But how? What has been the effect on Atlanta — and what are the implications for the future, especially given AT&T’s controversial bid to buy another major player, T-Mobile USA?
Back in late 2005, Atlanta was already reeling from major corporate blows. Delta Air Lines had filed for Chapter 11 bankruptcy protection, and Georgia-Pacific and Scientific Atlanta were bought out by larger companies with home bases elsewhere. So losing BellSouth added another blow to the city’s shiny image as a world-class home to major corporations, Sam Williams, president of the Metro Atlanta Chamber, said in a recent interview reflecting on the merger.
“The BellSouth logo on the skyline — sure, you’d like to have that,” Williams said. But local boosters recognize that their influence in boardrooms is limited.
“Corporations in America are going to make decisions about mergers and acquisitions, and cities are going to do what they can,” he said.
In this case, local business and elected leaders lost the fight to have the newly formed AT&T headquarters in Atlanta instead of Dallas.
Analysts said Atlanta was at risk of losing BellSouth at some point anyway, given the industry deregulation that started in 1996 and the explosion of technological innovation.
“Whether we like it or not, there would have likely been a change in the last five years with BellSouth, because the market was changing so much with all of the telecom players,” said Stuart Johnson, a managing partner with Barnes & Thornburg’s Atlanta law office.
Aside from image, jobs here also were lost. At the time the acquisition was announced, BellSouth and its Cingular arm employed a total of 25,147 in Georgia. Now, AT&T has 21,916 workers across the state, after consolidating certain units and cutting management as it moved to create a more national structure.
But unlike many mergers, which can devastate the hometown of an acquired company, Atlanta has benefited by becoming the consolidated headquarters of the combined company’s fast-growing wireless unit. Known as AT&T Mobility and Consumer Markets, the unit is the company’s largest source of revenue. The operation includes the company’s international services unit, retail arm, the whiz-bang Emerging Devices division and a yet-to-be-unveiled operation — one that executives say will employ “hundreds” of new workers, mostly in Atlanta, and will be “centered around the digital home.”
Store managers are trained here. New products are unveiled here. The next mobile phones are chosen here. The iPod deal was negotiated here.
Other top execs and their units are based in Dallas, such as the CEO, CFO and heads of human relations and legislative affairs, as well as the chiefs of business solutions, global marketing and diversified business.
But luckily, wireless stayed here.
“Wireless, everybody knows in telecommunications, is the future,” Ralph de la Vega, CEO of the unit, said in an interview with the Atlanta Journal-Constitution. “It’s by far the fastest-growing segment, the most exciting growing segment of telecommunications today. It made Atlanta, in my view, a center for mobility like it’s never seen before, with the backing of AT&T and the resources that we have now in Atlanta.”
Today, in fact, in parts of Atlanta and four other cities, AT&T launches its wireless “LTE 4G” network, letting customers — those with phones equipped with the technology to support the higher speed — download and transmit data much faster. AT&T said it will expand its 4G network to at least 15 markets by the end of the year.
Executives are hoping the move to the more robust network will reduce criticism from some customers and analysts over having a spotty network with dropped calls. AT&T is late in the game in offering LTE 4G, lagging behind No. 1 mobile phone company, Verizon Wireless, but executives and analysts say that was deliberate.
“I think AT&T has the advantage of having a technology path that’s a little bit more elegant or robust than what Sprint or Verizon have,” said Michael Hodel, an analyst with Morningstar. “By sitting back and letting Verizon do some of the heavy lifting [on 4G], they could benefit from this.”
De la Vega said public criticism about AT&T’s network is a motivator for him.
“It’s our job to figure out how to give them better coverage and better service, despite all the obstacles that we face,” he said.
There are ways in which the merger pulled power away from Atlanta, ironically making de la Vega responsible for things that are decided in Dallas.
For example, upgrading to the 4G network was a job managed in part with people based in Atlanta and New York — but mostly from AT&T’s Dallas headquarters, he said. That’s where the technical decisions about the network are made, which can determine the success or failure of de la Vega’s unit.
“The main core is in Dallas,” de la Vega said when asked about the organizational structure. Yet, “I’m responsible for the [profits and losses], so if something happens to the [profits and losses] that impacts it positively or negatively, I’m usually the one who has to go explain it to the marketplace, and I’m the one that people hold accountable.”
“Almost all of the technical stuff happens” in Dallas, said Jeff Kagan, an Atlanta-based telecommunications analyst.
As AT&T builds out its wireless network, it will be dealing with the fallout from the $39 billion offer it made for T-Mobile USA seven months ago. The acquisition has been thrown into doubt after the U.S. Department of Justice recently filed a lawsuit to block it, saying the new company would cost consumers money, stifle innovation and reduce quality.
Convinced that the deal is good for the company and consumers, AT&T has hired a team of lawyers to battle it out in court, if a settlement with the government can’t be negotiated. The combined company would be the nation’s No. 1 mobile phone operator, as well the dominant wireless carrier in Atlanta, capturing half of the city’s subscribers.
No matter what happens with that deal, de la Vega said, five years from now AT&T will get an even larger share of its revenue from the wireless unit in Atlanta, which will continue to innovate as customer demand grows.
“You will continue to see Atlanta be the Mecca for people that want to come and see great wireless things,” he said.
AJC staff writer Michael E. Kanell contributed to this article.
About the Author
