Just a few years ago both AT&T and Verizon sold off most of their cellular towers. For that, they got about $5 Blllion in cash, each.
Verizon used the money to purchase AOL, and as that was such a strategic acquisition they then went on to spend that much again to purchase Yahoo.
By selling off their towers, these companies transformed themselves from being a fixed cost business into a variable cost business. They shortchanged the future for the sake of today. But then, why would a company want to own the key assets that its business depended upon?
So it should now come as no surprise that both AT&T and Verizon have come to the realization that they must now pay rent. They are tenants on those towers, and they have found themselves with higher operating costs and with lower margins. Worse, they suddenly have realized that anybody—even T-Mobile—can rent space on those towers and provide identical coverage.
I heard the news that Verizon and AT&T have teamed up and have decided that they need to build hundreds of towers to get out from under crushing leases. Every existing tower lease is being scrutinized as it comes up for rent renewal. And, it is my opinion that Verizon is discontinuing towers are a noticeable rate…since my coverage seems to be getting worse and worse. (See: http://www.verizon.com/about/news/att-verizon-and-tillman-infrastructure-announce-collaboration-build-hundreds-cell-towers)
Verizon states in their press release: “We continue to focus on technology innovation and investing in the latest software platforms to provide the best possible customer experience on our network”. So, when Verizon sells off the vast majority of their towers are they investing in the best possible experience on their network? No, of course not. It’s just so ironic that they now claim that by building new towers that they will share with their #1 competitor that they claim they are investing in the best possible customer experience.
The bullcrap from these two corporate entities has a terrible smell. Consider this statement by AT&T: “We need more alternatives to the traditional tower leasing model”. Um, what? Are they calling us stupid? They JUST sold off their owned towers so that they could be transformed into the tower leasing model that now they are eschewing.
Both AT&T and Verizon express excitement at the prospect of working with each other. Does anybody see anything wrong here, with the two market dominant companies working together while locking out the remaining competitors? Which is worse, the anti-competitive aspect or the short-sightedness.
A few key ingredients seem missing from the AT&T and Verizon business recipe. Some of those include truth, a sense of history, perspective, and vision.