Baby Bells Now Corporate Giants

By Deborah Mesce, Ap | THE JOURNAL RECORD, December 17, 1988 | Go to article overview

Baby Bells Now Corporate Giants


Deborah Mesce, Ap, THE JOURNAL RECORD


WASHINGTON - The Baby Bell telephone companies, as part of the AT&T breakup, were given the lucrative Yellow Pages business because it was feared they would be unable to survive apart from their parent.

As it turns out five years later, those fears were unfounded.

The seven Baby Bells, which carved up American Telephone & Telegraph Co.'s local operating networks, are among the nation's corporate giants with assets ranging from $19 billion to $27 billion and investments in a variety of domestic and international businesses.

In fact, directory publishing has become such a good money-maker that many of the Bells have removed Yellow Pages from the regulated side of their businesses and now use those profits to support other competitive ventures.

``They came out of the blocks faster than anyone anticipated,'' said Robert Morris III, a San Francisco-based telecommunications analyst with Goldman, Sachs & Co.

Some say the Baby Bells learned to run before they learned to walk.

Many of their investments in the early years went sour and many hundreds of millions of dollars were lost. Some analysts said those investments were a sign that the companies were still acting and thinking like regulated businesses and hadn't yet learned how to compete in the open market.

``It's still too early to say the Baby Bells have outgrown the legacy of what some people say is a bell-shaped head,'' said Michael Dortch, an independent market analyst based in San Francisco.

At Englewood, Colo.-based U.S. West Inc., Chairman Jack A. MacAllister said hiscompany's failed attempt at expanding its customer equipment business beyond its 14-state region taught the company something about competition.

``We didn't understand the market sufficiently and as we got into the business, the margins disappeared,'' so the company pulled out of the business and took a $100 million writedown in the fourth quarter of 1986, he said

``That was hard for us to take, but the good part about it was it set a tenor for our business,'' he said. ``We made up our mind that as we get into competition there are going to be some times we win and some times we fail, and when we see that we made a mistake, instead of trying to wish it would be better we try to face up to the mistake.''

Here, at a glance, are the seven Baby Bells:

Ameritech: Phone companies operate in Illinois, Indiana, Michigan, Ohio and Wisconsin. Unregulated subsidiaries in financing, cellular and paging products and services and directory publishing. …

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