AT&T bulks up

Deal with BellSouth puts more wireless, other services on tap

AT&T Inc.

Headquarters: San Antonio

Leaders: Edward Whitacre Jr., chairman and CEO; Don Herring, president, AT&T Government Solutions

Employees: 189,000

2005 revenue: $43.9 billion

2005 net earnings: 4.8 billion

2006 Top 100 rank: 31

2006 government wins:

» 10-year, $250 million Joint Hawaii Information Transfer System contract from the Defense Department to supply customized telecom and data services to
military departments in Hawaii

» $22.7 million subcontract from ITT Industries Inc. to support and manage a network operations center in Kuwait that will serve military commanders in Asia and Africa

» Five-year, $11.8 million contract for operations and maintenance support for a Web-based system for forecasting and tracking Army personnel

» $8.2 million in orders for 36 secure, high-capacity circuits to the Defense Information Systems Agency

» Three-year, $95.4 million contract for circuits and to manage network bandwidth for the Defense Information Systems Network

» A subcontract worth as much as $51 million to build a modern IP network for voice and videoconferencing for DISA

» $15 million in follow-on work on two contracts to develop the Army's next generation of live battlefield training systems under the One Tactical Engagement Simulation System program

Don Herring, AT&T Government Solutions president

Rick Steele

When AT&T Inc. completes its $67 billion acquisition of BellSouth Corp., it will become the largest telecommunications company in the country, and add hefty wireless capabilities to its government offerings.

AT&T will tack on nine southeastern states and take total control of Cingular Wireless LLC.

"AT&T is already formidable," said Brian Washburn, an industry analyst who follows the company for technology research firm Current Analysis Inc. "Adding another nine-state incumbent local-carrier footprint to that simply makes the already formidable even more formidable."

AT&T and BellSouth expect the deal to close this fall.

The acquisition bodes well for Vienna, Va.-based AT&T Government Solutions, the division that serves the federal government.

"Once the deal is approved with BellSouth, we'll be able to work on integrating the business and, in particular, taking Cingular's assets and determining how they can best be suited in an integrated fashion with the rest of AT&T's business to the federal agencies," said Don Herring, AT&T Government Solutions president in his first interview since taking control of the unit in March.

Only the beginning

AT&T's government unit has not begun making plans about integrating BellSouth and Cingular and using their assets, because of restrictions placed on the company until the deal is completed, Herring said.

Cingular will not bring a huge strategic change at AT&T Government Solutions, but the unit can use its assets to address federal agencies' concerns about the future of networking and the convergence of wireline and wireless technologies, Herring said.

Employees who telecommute, for example, don't care about whether they communicate with their offices via landline or mobile phone, broadband or dial-up Internet access, as long as they have speedy, reliable and secure service, he said.

"Having those assets will help us down that convergence path that will help agencies over time," said Herring, who has been a part of AT&T for more than 20 years. He has held several positions at AT&T including being in charge of mid-size business accounts and AT&T Business Services for the mid-Atlantic.

Cingular of Atlanta is owned by BellSouth, and AT&T, which acquired 60 percent of the company when SBC Communications Inc. bought it for $16 billion in November 2005.

For most of 2005, Herring worked as part of an executive team that planned the integration of the former AT&T Corp.'s sales organization with SBC Communications.

AT&T's main rivals in the government telecom market, Verizon Communications Corp. and Sprint Nextel Corp., also offer wireless services.

Its other competitor, Qwest Communications International Inc., has an agreement with Sprint Nextel to resell its wireless services to consumers and business customers mainly in its local service area in the West.

"We don't really know what [AT&T's] vision is" for Cingular, said a Sprint Nextel spokesperson, who declined to be identified because the company competes with AT&T. "We don't know how well the new AT&T will choose to integrate those business entities."

Networx dreams

Herring is placing his biggest bet on winning a slot on the General Services Administration's 10-year, $20 billion Networx telecommunications contract. Vendors will be selected to compete for task orders under a Universal portion of the contract and an Enterprise part.

GSA will issue awards for Universal in March 2007 and for Enterprise in May 2007. AT&T is not on GSA's FTS2001 telecom contract, but has an FTS2001 crossover vehicle through which it offers voice, data and video services worldwide to the federal government.
AT&T Government Solutions also will pursue GSA's $65 billion Alliant contract for governmentwide IT services, Herring said.

The company is also waiting for the outcome of the Treasury Department's 10-year $1 billion Treasury Communications Enterprise communications contract.

AT&T Corp. won the original contract in December 2004, but the award was canceled when the department revealed a private agreement with GSA and the Office of Management and Budget to eventually migrate to the Networx contract.

The Treasury Department later changed its mind and decided to proceed with TCE and hold a new competition, arguing that Networx would not meet its needs.

AT&T does not break out revenue for its government solutions unit, although it's divided evenly between network services and professional solutions, Herring said.

About 60 percent of revenue comes from defense agencies and 40 percent from civilian agencies, he said.

AT&T Inc. of San Antonio is No. 31 on Washington Technology's 2006 Top 100 list of federal prime contracts. The company had $432.7 million in revenue from federal telecom and IT work in 2005, as measured by the rankings.

Herring declined to say how much he expects AT&T Government Solutions' revenue to grow this year.

Most of AT&T Government Solutions' 4,000 employees work in the Washington area, with about three-quarters working in the professional services side of the business. Five percent to 10 percent of the 4,000, which came on board from SBC, are in other locations. SBC's government business focused on government agencies and military bases in its 13 states across the country and providing service in some other cities around the country.

Herring is working on the company's ongoing strategy of marrying its network solutions with professional services. An example of where the company has done this is the National Do Not Call Registry, which AT&T created and maintains for the Federal Trade Commission, Herring said. AT&T won the 10-year, $3.5 million contract in February 2003 to develop the phone number registry that gives consumers a free and simple way of limiting unwanted telemarketing calls. The database has about 130 million registrants.

Another example is the Army's One Tactical Engagement Simulation System program, he said. Under a series of contracts, AT&T Government Solutions has developed war-game technologies for live battlefield training.

The Sprint Nextel spokesperson pointed out that all the major carriers have blended network and professional services by providing managed network, mobility and security services.

"I haven't seen any changes in what AT&T has been trying to accomplish for some time," the spokesperson said.

Nevertheless, the BellSouth deal along with Cingular's assets, will enhance the marriage between the company's network solutions and professional services in offerings for the federal government, Herring said.

"The integration of network and professional services ? that's really where our future is, where we want to head and one that will allow us to continue our success," he said.

Staff Writer Roseanne Gerin can be reached at rgerin@postnewsweektech.com.

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