Gartner's MCI blunder

We can't resist publishing an an email we received from Silicon Valley Guy reacting to a BusinessWeek paper “One Big Qwestion Mark” in the May 16th issue about Qwest and Verizon going after MCI. Read it, it's quite entertaining. Thanks SVG!

"Unfortunately for Gartner, its track record on correct analysis on this topic is rather slim. Jay Pultz and his colleagues got most if not all aspects of the most recent round of telecommunications mergers wrong.

In the Gartner Research Note G00124887 “Our Top Predictions for 2005, and Beyond” which is part of the annual Predictions series that got it big time wrong on telecomm acquisitions. A number of interesting points about this prediction:

· Qwest was never even mentioned
· Verizon was dismissed as a potential buyer of AT&T or MCI
· BellSouth never made a play for AT&T or MCI
· Is was SBC that bought AT&T, not BellSouth
· It appears to be Verizon that will buy MCI not SBC
· This prediction was wrong within only a couple of months

What does the analyst being so wrong mean (in such a short piece) for clients relying on the recommendations of the analysts?"

Here's the incriminating Research Note as posted for free (with compliments from Gartner) on their web site:

"Prediction: In 2005, AT&T will be acquired by BellSouth and MCI will be acquired by SBC.

A number of forces are coming together to make this prediction possible, and then improve the likelihood that it will occur.

Regional Bell operating companies (RBOCs) such as BellSouth, Verizon and SBC no longer have regulatory restrictions concerning what network services they can offer. In the past, they were unable to acquire interexchange carriers, such as AT&T, MCI and Sprint. The RBOCs wish to be leading fullservice providers.

RBOCs have the financial strength to conduct mergers of this size. AT&T is more likely to be acquired by BellSouth due to past relationships and negotiations. The direction and financial situation of Verizon — and the apparent lack of interest of its key executives — make it less likely that Verizon (compared to Bell South or SBC) will make a major acquisition. Therefore, MCI is more likely to be acquired by SBC. AT&T and MCI are No. 1 and No. 2 in market share in long-distance services to the Fortune 1000, respectively, but their long-distance revenue has been declining more than 10 percent per year, primarily due to RBOC inroads in consumer long-distance voice. AT&T and MCI are financially constrained to grow or acquire new businesses to offset the revenue declines. Although the RBOCs would rather wait for such mergers, other companies' interest in MCI and AT&T will compel them to move quickly rather than later. "