Telecom Tempest Tosses AT&T Again - TheStreet

Telecom Tempest Tosses AT&T Again

Another high-profile executive departure threatens to roil the big telco.
Author:
Publish date:

Tough times in telecom mean yet another shakeup at AT&T (T) - Get Report.

AT&T President Betsy Bernard, the highest-ranking woman in the phone service industry, was replaced Tuesday by Bill Hannigan, former chief of travel information management service

Sabre

(TSG) - Get Report

.

Bernard, who spent nearly two decades with AT&T, rejoined the company in 2001 when the previous CEO, Mike Armstrong, asked her to head up the company's struggling consumer business. Bernard was later promoted to head the business services unit under AT&T's new CEO, Dave Dorman.

Given its scale and expertise, AT&T kindled high hopes on Wall Street that it would emerge as a clear winner in the business of selling voice and data services to companies. Rivals led by

WorldCom

, now called

MCI

(MCIAV)

, as well as

Qwest

(Q)

and

Sprint

(FON)

have all managed to trip over scandals of one size or another in recent years.

AT&T's inability to capitalize on the opportunity was seen as a glaring failure, and yet another bad omen for the sector. After several years of revenue erosion, there remains little sign of recovery, as the players continue their

cutthroat pricing to attract what little business is available. On Tuesday, AT&T shares rose a nickel to $20.40, leaving them some 25% off their 52-week high.

Bernard is the third bigwig at AT&T to depart this year. In an April shakeup, top network engineer Frank Ianna and sales chief Ken Sichau were shown the door.

"The number of senior executive AT&T has gone through in the past decade has been startling," says Jefferies & Co. analyst Rick Klugman. "A lot of that reflects the turmoil in the telecom industry."

Some investors and analysts worry that the sudden departure of Bernard is a sign that business conditions are getting worse as second-tier and reorganized telcos flood the market with cheap service offers.

Compounding the troubles for AT&T, outsourcing firms like

EDS

(EDS)

,

IBM

(IBM) - Get Report

and

Accenture

(ACN) - Get Report

have invaded the communications management field that was once dominated by Ma Bell. These tech consulting outfits buy wholesale phone and data service and configure it to their clients' network needs, effectively removing the big service providers from that role.

Some industry experts say Dorman's simply hired an old chum from his

SBC

(SBC)

days, who knows a thing or two about selling info management services.

By hiring Hannigan, "AT&T is essentially saying it wants to strengthen its managed services business," says Forrester Research analyst Lisa Pierce. "This is the type of person that gives them needed experience and legitimacy."

Yet others, like Yankee Group's Brian Adamik, say with Dorman firmly in position, Bernard's opportunity to run AT&T may have been limited. "I'm taking this complete at face value," says Adamik. "She may really be interested in exploring other opportunities."