AT&T; Revises Its Overseas Strategy
For American Telephone & Telegraph, it seems, nothing is too small or too big in the Pacific region, the fastest-growing telecommunications market in the world.
Last July, the giant U.S. firm began providing operator-assisted service through New Zealand to Pitcairn Island--of “Mutiny on the Bounty” fame--where the 63 inhabitants share one phone. Last week, AT&T; and a group of other U.S. and foreign telecommunications firms signed agreements totaling $707 million to build two underwater fiber-optic cable systems that together will provide a communications system spanning the Pacific Ocean by mid-1989. Analysts and industry observers believe that AT&T; is making the right choice in reaching out to the millions of people in the Pacific Basin.
Brian R. Fernandez, chief investment officer at the Manhattan office of Nomura Securities, said the rising volume of telecommunications business across the Pacific, and the willingness of AT&T; and 22 other companies to invest $600 million in one of the underwater cable projects, “all point to a dramatically increasing role for the Pacific Basin in the economic growth of the United States. AT&T; would clearly mirror this (trend) in its plan.”
Slowdown in Growth of European Market
Historically, Europe has been the focus of AT&T;’s growth in the overseas long-distance market. But growth in Europe has slowed while the telecommunications needs of the Pacific are surpassing the rest of the world, according to a spokesman for AT&T;’s communications unit.
Industry estimates project a 25% annual increase in worldwide calling volume for the next few years. In the Pacific Basin, the growth rate is expected to be 25% to 30% a year while Europe’s slows to 15% to 20%.
Global telecommunications involves two methods of transmission--satellite and cable. The number of satellite circuits crossing the Pacific has risen sharply during the last three years, increasing 29.3% in 1985 from the year before. That is more than double the 13.3% increase in the number of Atlantic circuits, according to Communications Satellite Corp., a Washington-based publicly held company that provides domestic and international communication services.
The growth of transoceanic cable circuits, however, has been curbed by the limited capacity of existing equipment.
Now, with new technology, Pacific Rim countries can leapfrog from having practically no telecommunication systems to state-of-the-art technology. A fiber-optic cable, for example, can send communications signals at the speed of light through hair-thin strands of glass fiber and is capable of transmitting 40,000 telephone calls simultaneously. In contrast, a copper coaxial cable transmits data at low speed through low-capacity bands of copper that can handle only 840 calls at one time.
Harry K. Rosenthal, an analyst with the brokerage house of Bear, Stearns & Co. in New York, said: “The (fiber-optic) cable is very important to increase capacity in the Pacific Rim.”
The AT&T-led; group of investors will spend the first $600 million to build a 7,200-nautical mile fiber-optic underwater cable from Point Arena, Calif., to Guam and Japan, via Hawaii. AT&T;’s American co-owners include Hawaiian Telephone, ITT World Communications, MCI International, RCA Global Communications, Western Union Telegraph, GTE/Sprint and FTCC McDonnell-Douglas International Telecommunications. AT&T; and its American partners will own 63% of the cable venture. AT&T; owns 56% of that interest. The group will install the system to Hawaii and then on to a point about 850 miles east of Japan. From there, Kokusai Denshin Denwa Co., Japan’s international communications carrier, will complete the installation.
AT&T;’s international partners include telecommunications organizations from Britain, the Philippines, Australia, New Zealand, Taiwan, South Korea and West Germany.
AT&T; and 16 of the 22 companies involved in the first underwater project have also agreed to build a $107-million fiber-optic cable between Guam and the Philippine island of Luzon. American firms have a 47% interest in that 1,400-nautical-mile system, which AT&T; will install.
“When these systems are in place, the U.S. carriers and their partners will provide high-capacity digital services between nations in the Pacific Basin to meet the growing communications demands from this vital part of the world,” said Richard K. Jacobsen, vice president-international for AT&T; Communications.
