Ameritech Corp. is best known as the telephone company for the Midwest, but its executives, like those of its sister regional Bell companies, see opportunity for profit overseas.
While the Chicago-based firm`s strategy is to remain a high-quality local carrier and the best investment among the seven ”Baby Bell” companies, officials say they are pursuing markets in Eastern Europe and Mexico.
By most counts, the overseas pursuit of telephone-related business by Ameritech lags behind that of a number of other Bell companies. The Bell companies have operated competitively as independent firms since the 1984 breakup of AT&T.
One of the main reasons regional Bell companies have ventured into young, risky overseas markets in recent years is for the experience they may gain. If the firms learn the business of providing cable television, fiber optics, consulting and other services abroad, they could each be ready for dominance in domestic markets when and if court-imposed restrictions on the Baby Bells are relaxed, industry experts say.
That calls into question the wisdom of Ameritech`s decision not to explore foreign markets more aggressively.
”We could be a little bit behind the curve offshore, compared to the rest of the regional companies,” said Chairman William L. Weiss. ”But there are so many opportunities and such timing differences in those opportunities, I don`t think it will limit our opportunity to grow.”
Ameritech Mobile Communications was part of a consortium that failed late last year to win a license to build and operate a lucrative cellular telephone network in West Germany.
But Ameritech is still competing for business around the world, Weiss said. ”We are now looking aggressively overseas,” he said. ”There are a number of countries becoming available. We`re even looking in the Eastern bloc.”
The company has sent representatives to Poland to discuss with government officials there the operation of a cellular telephone network, a company official said, adding that Ameritech has not submitted any bids.
Also, the company is competing in a ”near-term case” in Mexico for cellular business opportunities, Weiss said. There, Ameritech and the partners in its consortium hope to win a license to provide cellular service in one of eight regions.
Weiss expects the Mexican government to make a decision on bids within a month. He did not indicate the revenue potential in the Mexican venture, but added, ”It`s worth your time.”
He added that Ameritech is in the ”early stages” of competing for two other foreign ventures.
”Foreign ventures are timely and costly up front, and they take more resources,” said Steve Sazegari, senior public network industry analyst for Dataquest Inc., a market and technology research firm based in San Jose, Calif. In the short term, ”it`s wise” to enter markets slowly, he said.
”In the long term, it`s not wise, because they will stack up behind the other guys,” Sazegari said.
But Weiss remains confident of his firm`s approach. ”Each of us (Bell companies) will get some of the opportunities and not get others,” he said.
”We look carefully as to whether it`s something our skills can handle and whether or not we can add to shareholder value by entering that particular market. Outside of the core telephone operations, there`s a lot more talk than substance today.”
Even before the breakup of the Bell system produced the Baby Bells
(Ameritech, Bell Atlantic Corp., BellSouth Corp., Nynex Corp., Pacific Telesis Group, Southwestern Bell Telephone Co. and U S West Inc.), Ameritech had decided to make enhancement of local telephone services its primary objective, officials say.
The company invests almost $2 billion a year in its operations, said William H. Springer, vice chairman and chief financial and administrative officer. He added that $1 billion of that yearly investment is dedicated to fiber-optic cable and digital telephone switching systems in its five-state region of Illinois, Indiana, Michigan, Ohio and Wisconsin.
Because it has reinvested in its network, Ameritech boasts that it has led the other regional Bell companies in bringing key telecommunications services to the market, Springer said. He listed the introduction of mobile cellular service and Open Network Architecture among Ameritech`s major firsts. But the company did suffer a black eye when a fire crippled Illinois Bell`s switching center in Hinsdale in May 1988, shutting down phone service to 35,000 people for nearly a month. Alternative carriers will not let Ameritech forget that event.
”The local market is in the dark ages,” said Anthony J. Pampliano Sr., president of Metropolitan Fiber Systems Inc., an Oakbrook Terrace-based telephone company that connects local companies to the switching centers of long-distance carriers with fiber-optic cable, thus bypassing Illinois Bell`s lines.
”We need to educate the marketplace,” Pampliano said. ”We need to get people to understand what`s happened in Hinsdale. People don`t realize the importance of a multiple-carrier marketplace.”
But even with heavy investments in its telephone network, Ameritech officials seem to take the most pride in the performance of the company`s stock, rating it the best investment among the regional Bell companies.
”We have led all the regional companies all six years in return to the investor,” Springer said. ”Our financial performance has been the best and the soundest.”
Since divestiture, Ameritech`s return on equity has increased to 15.8 percent from 14.3 percent, he said, adding that the growth in dividends has averaged 7.8 percent a year, first among the regional companies.
Ameritech`s companies were the first Bell firms to reach their earnings limits, the income allowed by federal and state regulators, Springer adds. But some analysts have questions about how Ameritech`s management, which grew up with the ”old” Bell system, will evolve in an industry of heightened competition, more liberal regulatory policies and more emphasis on marketing. Investors may demand that Ameritech shed some of its conservative ways.
”Wall Street wants jazzy stuff,” said Richard Toole, vice president at Merrill Lynch & Co. in New York. ”There are people who would say, `It`s too plain vanilla; there`s not a lot of pizazz.` ”
”In the current market, Ameritech`s stock is fairly valued,” said Frank Governali, vice president at First Boston Corp. He added, ”There are other phone companies where the stock price does not reflect the growth potential.” Nevertheless, analysts say Ameritech is one of the best, if not the best, local phone service provider. They commend the company for selectively pursuing markets and products, such as audio information services, with profit potential.
Industry insiders also respect Ameritech for its aggressive pursuit of liberalized regulation of the telecommunications industry. Each Ameritech official vocalizes concern that regulation by one unelected official-U.S. Judge Harold H. Greene, who enforces the federal order that broke up American Telephone & Telegraph Co.-is restraining the entire U.S. telecommunications industry as it tries to contend with expansion in other nations.
Because the company`s main business is regulated, it must differentiate its service from those of the other regional Bells in unregulated businesses, such as cellular telephone service, voice mail and telephone directory publishing. In those businesses, which officials say are growth areas, Ameritech is a market leader throughout its five-state region, even though other Bells, such as Southwestern Bell with its Cellular One, compete directly.
Ameritech has not looked for any ”major plays” in another industry, cable television, that could be fruitful, said Robert L. Barnett, president of the Ameritech Bell Group. Meanwhile, Pacific Telesis is pursuing Group W Cable, one of Chicago`s cable franchises.
