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CEO Out to Change SBC into Diversified Global Giant

Posted on: Wednesday, 20 April 2005, 18:00 CDT

Apr. 20--SBC Communications Chairman and CEO Ed Whitacre Jr. rocked the telecommunications industry in January when he announced his $16 billion deal to merge with AT&T.

Whitacre hopes to transform the one-time Baby Bell from a big phone company with operations in 13 states to a diverse global communications giant. His goal is to offer businesses and consumers the so-called triple play of telecom services: phone, high-speed Internet and video.

Whitacre projects tremendous growth in the cell phone market, where SBC, which owns 60 percent of Cingular Wireless and will pick up the wireless arm of AT&T in the merger, already has market strength. And he's banking on a new and growing phone service called voice over Internet protocol that lets calls be made cheaply over computer data lines.

SBC also says it is investing some $4 billion to install fiber optics in homes in its Project Lightspeed, which will lead to an Internet-based digital television service it hopes to have in 18 million households within three years.

All of these services, he says, can be bundled in cheap pricing packages. But that has many consumer advocates concerned about a lack of competition that they say will drive prices skyward.

After a speech Tuesday in Houston to the Greater Houston Partnership, Whitacre discussed his strategy with Chronicle reporter John Roper.

QUESTION: You bought AT&T to get its national network and its ability to offer telephone service over the Internet.

At some point, you're going to be selling this service from Los Angeles to New York. The SBC name is widely recognized throughout Texas, but it's not widely known in, say, Brooklyn. How do you overcome that?

ANSWER: We've got some people looking at that, but we're not going to do anything for the name until it's closer to getting this deal done.

Q: Seems it would be hard to entirely abandon the AT&T name.

A: It's a very powerful name worldwide. Not too many people know us over there in Massachusetts and elsewhere. Internationally, AT&T has the best name.

So we have to figure out what to call this new company: AT&T or SBC.

There's a lot of permutations of that. You could call it AT&T Powered by SBC, or you could come up with a combination of the two.

Q: Where do you see Internet telephone service going?

A: I see it going strong and getting bigger, much bigger. Some of the advantages are: You could have a New York telephone number and live here in Houston. You could have customers in London with New York area code and telephone numbers.

Q: Consumer advocacy groups have complained fewer players means fewer choices and higher prices. You may be able to keep prices down in the short term, but what about in 10 or 20 years?

A: There aren't fewer players. That's what everybody doesn't get. You look in Houston, I'll bet there are 50 companies here you can get local telephone service from ; maybe 100.

Ennis, Texas, my hometown, a little bitty town up near Dallas, you've got 20 local service providers and the town's got 12,000 people.

There's wireless now, and a lot of our customers now take wireless and do away with the wireline. They don't even have one. And AT&T is not even in the local business anymore.

Q: You were recently in Washington testifying before Congress on this subject. And you spoke a bit about telecom regulations needing to be rewritten.

A: Oh, badly.

Q: What kind of changes would you like to see?

A: Well, the law was written and enacted in 1996. You know how many times the Internet is mentioned in telecom law? Zero. It wasn't a big deal in 1996. Technology has moved so far since '96. The wireless business, you know, really wasn't going strong in 1996 as a substitute for landline or local service. The whole thing is hopelessly outdated. It's got to be rewritten.

Q: It's an interesting marketplace: You've got cable companies offering telephone service and telephone companies offering cable TV. How tough of a learning curve is it for SBC to deliver content for television?

A: It's hard because we've never done it or had the capabilities to do it. We've got this Project Lightspeed that gives us the capabilities, now we have to go get content.

That's our plan. But it's a new business for us. We've got to figure that out. But we would offer voice service, we'd offer long-distance service, we'd offer broadband, we'd offer wireless service, and we'd offer video so the customer would get everything they needed in one package in a bundle for $100 to $110 a month.

That's a good deal. And our studies show that the cable companies, while they're in our business, are not exactly the most well-liked in America. If we can offer all of those services, all bundled on one bill at an attractive rate, we think we can be successful.

Q: Didn't it used to be the phone company that nobody liked?

A: That's kind of switched. I've always liked the phone company, though.

ED WHITACRE JR.

Chairman and CEO of SBC Communications

-- Age: 63

-- Born: Ennis, Texas

-- College: Texas Tech University, 1964, bachelor's in engineering

-- Career: Started in 1963 at Southwestern Bell Telephone Co. as a facility engineer in Lubbock

-- Positions: Named president and chief operating officer in 1988; named chairman and CEO in 1990

-- 2004 pay: $2.1 million salary, $6.2 million bonus

Source: SBC Communications, SEC filing

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Source: Houston Chronicle

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