BUYERS' MARKET

If the telecom market is to go through its long-expected consolidation, it probably won't come from one of the larger incumbent carriers going on a buying spree. Last week, the CEOs of both SBC and Sprint, two companies that many had expected to be on the acquiring end of the consolidation trend, said they had little interest in buying more assets. Both Ed Whitacre and Gary Forsee, of course, didn't completely rule out acquisitions. But both appeared to be sending the message to any potential acquisition targets that, given current market conditions, sellers would need to reconsider the value of assets on the block. Such disconnects between the sellers' perceived values and buyers' willingness to pay appears almost epidemic over the last year. SBC itself, along with Verizon Communications, recently pulled back on auctioning off some rural access lines, reportedly because buyers weren't willing to pony up what either company thought was fair value. Citizens Communications also went through its recent financial restructure, according to several sources, after the company found no buyers at what it thought was an appropriate price. Barring a radical shift in the valuation process, it appears that the most likely potential buyers to start consolidating may come from outside the typical candidates. It's not unconceivable that a large consumer electronics manufacturer, a cable operator or even a company like Microsoft could acquire significant traditional telco assets. While consolidation may in fact be desirable for the overall health of the industry, ultimately, it may take a fresh face to make the first move.