Mergers May Leave Agents Spinning Wheels

Giant telecom mergers threaten to radically narrow the field of national phone companies that outside sales agencies could represent at a time of heightened disparity between strong and weak carriers.

Some sales reps say the megamergers would result in fewer independent representatives supporting the biggest phone companies, limiting agents’ options. “I figure a lot of these agencies are going to get wiped [out],” says Peter Radizeski, president of RAD-INFO Inc., a telecom consultancy representing about 20 carriers. The agent programs at the phone companies planning to combine “are probably so different they are not going to be integrated well, so some people will go,” he adds.

The mergers will shrink the group of carriers agents can recommend to their customers, says Evan Gillman, co-founder of sales agency Transit Broker LLC. He says the neutrality agents offer “suddenly isn’t there anymore when we’re pitching the same three vendors for everything.”

Geoffrey Shepstone, president of Telecom Brokerage Inc., a master agency, says the industry is headed toward a ‘duopoly’ if SBC Communications Inc. and Verizon Communications Inc. acquire AT&T Corp. and MCI Inc. “It will be a lot easier for us to be squeezed out of the marketplace in the event of a duopoly,” says Shepstone.

Brad Miehl, president and CEO of master agency MicroCorp, expressed confidence the mergers do not signal an end to competition. “I think there will always be competition,” Miehl says. “[Consolidation] will foster new forms of competition.”

The big mergers also could pump fresh blood into the agent community. SBC and Verizon have promised billions of dollars in savings by acquiring AT&T and MCI, and they plan to slash costs partly through workforce reductions. SBC, for example, is planning 13,000 job cuts. Thousands of employees in the telecom industry - including direct sales reps - will be bracing for a pink slip as the mergers near closing. Sales reps let go could become independent agents either supporting the telecom behemoths who showed them the door or landing accounts on behalf of their former employers’ smaller rivals.

The phone giants involved in the pending mergers declined to comment on the implications for independent sales representatives. An SBC spokesman says it is too early to comment on the ramifications while AT&T provided PHONE+ a generic statement that offered no particulars about the implications for the agent channel.

Gillman, who represents AT&T’s small business division, ACC, says AT&T held a conference call a few days after SBC announced plans to acquire AT&T in a $16 billion pact, but the “only message was ‘business as usual.'” “Nobody’s heard a peep since this thing was announced,” he says. “The reality is this is so far off.”

Joe Osborne, founder and CEO of Netcomp Communications Group Inc., an AT&T authorized agent, says there is nothing to report at the moment. “It’s just a “wait and see”[situation],” he says when asked about the effect of the mergers on agents. “It’s just an unknown. There’s not much you can do about it.”

Luis Fiallo, managing director of marketing and corporate development with China Telecom USA, which started an agent program last year, says the mergers will force sales agencies to seek alternatives beyond the U.S. carriers. “It gives us an opportunity to attract agents that want to be able to serve … multinational customers’ seeking data connectivity to China, Fiallo says.

Steve Braverman, CEO of sales agency X4 Communications, says the megamergers will complicate customer service and billing for the regional phone giants as they integrate multiple systems. He contends that will give agents representing smaller telecom firms an opening to woo customers requiring a level of support the phone giants can’t provide.

But they also are much stronger than hundreds of smaller rivals, many of whom are struggling to grow sales and reverse years of losses. Radizeski anticipates competitive telecom providers and national fiber-optic carriers will continue facing problems following the mergers, and he would not be surprised to see more bankruptcies. That could further limit options for agents who were burned a few years ago when a slew of carriers reorganized under massive bankruptcies. “I think other carriers are going to be hurting so bad, the ripple [effect] will just keep going for a while,” Radizeski says.

Many of the phone companies involved in the planned mergers have reorganized their independent sales channels over the last year. In January, for example, Verizon Communications Inc. eliminated an ‘authorized’ tier for agents supporting businesses, according to Micki Clemens, national recruitment manager with Verizon’s business solutions group. She says that tier did not require agents to exclusively represent Verizon.

Verizon is seeking to garner a larger proportion of its partners’ sales, Clemens says, noting the No. 1 phone company has about 50 partners supporting a business unit. “We’re very selective in the type of partner we bring in,” she says.

Miehl says he hopes Verizon would not require agents to exclusively represent MCI’s services or change the compensation model. “I would hope they would not take an in-region attitude for out-of-region sales,” he says. “If they do that, it would be bad.”

Radizeski says agents and the regional Bells don’t have the easiest relationship. “The Bells don’t exactly want an agent channel because they can’t control an agent channel,” he says. “Almost every quarter, they [reevaluate] what the focus is going to be and, if you’re an agent, it’s very hard for you to change your focus every quarter.”


AT&T Corp.
BellSouth Corp.
China Telecom USA
Cogent Communications Group Inc.
MCI Inc.
Netcomp Communications Group Inc.
SBC Communications Inc.
Telecom Brokerage Inc.
Transit Broker LLC
Verio Inc.
Verizon Communications Inc.
X4 Communications

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