AT&T Bull's Rebuttal
by David Forrest ([email protected])

Pauly, Pauly, Pauly. Ya still don't get it, do you? Your arguments are based on a misguided belief that AT&T will lose on the long-distance front, that it won't be able to make the TCI merger work, and that the British Telecom deal offers no new customers. In my opinion, you're wrong on all three counts. Here's why. I'll break it out into my own version of the 3 C's -- communication, convenience, and competition.

Communication -- Is there anyone reading this that doesn't agree that global communication will continue to see greater demand? I hope not. Beepers, cell phones, Internet telephony, digital communications, high-speed Internet access, broadband technologies, intranets, etc. It's all about bringing the world closer together through communication. Given our agreement about this, AT&T will crush the competition in the next two C's, convenience and competition.

Convenience -- Right now, I have two mobile phone bills to pay each month. I have a cable bill (basic cable and high-speed Internet access with a cable modem). I have a local RBOC bill (GTE), and a long-distance bill (Tele-Save). AT&T is setting things up so that it can offer every one of these consumer services and consolidate them into one regular utility bill. It's easy and convenient. The acquisition of Teleport got AT&T into the local markets and I imagine the company will continue to vigorously compete with local carriers through more acquisitions. I also imagine that with its ownership of TCI the company will begin offering local service through the cable operations. This is a great way for AT&T to interject itself into the previously ironclad local markets. Just genius.

Competition -- Let us never forget the very nature of competition. If you think competition is squeezing Ma Bell in the long-distance market, what do you think is happening to the little guys in that arena that keep lowering their prices just so they don't get crushed by one another? Eventually, they'll either drop out of the business because they can't make money, or they'll be acquired by a larger company like... er... AT&T. The company has the resources to tough it out in this time of intense price competition. It has shown a willingness to exit unprofitable markets, and will continue to do so. In the end, however, it will still remain on top of the long-distance heap.

As I said in my opening argument, AT&T "wants to own the pipes that businesses and individuals use to communicate with one another, and it wants to collect the repeat revenue from use of these pipes." For the first time in a very long time, AT&T has its eye on the ball. Management is building a portfolio of investments in companies that will help AT&T become the primary pipe through which we all communicate with one another. At about $53, I think AT&T will offer market-beating returns for the foreseeable future. A winner.

Next: The Bear Responds