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AT&T Finds It Tough to Crack Foreign Markets

February 26, 1988|From Reuters

NEW YORK — Trade barriers, political resistance and poor planning have made it much harder than expected for American Telephone & Telegraph to break into foreign markets.

"I don't think there is any question" that AT&T has found it more difficult than it planned to extend its reach beyond the United States, James E. Olson, the company's chairman, said this week.

"But the fact that it is more difficult hasn't in any way caused us to lose our appetite to truly move toward being a global player," he said in an interview.

AT&T is not the only company having trouble bringing its products and services to customers abroad. But the New York-based telecommunications giant has made international expansion a key part of its strategy to bolster profits even as its long-distance and telephone equipment businesses mature in the United States.

Moreover, AT&T says it will take about a year longer than planned to make its computer business profitable, which will further hinder earnings growth.

If AT&T remains shut out of foreign markets, it will be hard pressed to continue the financial recovery it made last year, industry analysts said.

Olson blamed AT&T's troubles in part on the continued reluctance of foreign governments to open their telecommunications markets to foreign suppliers. "The United States market is wide open," he said. "That is not true for the rest of the world."

And when foreign competitors are allowed in, political considerations often dictate which one is chosen, Olson said.

"We found that out in spades in France, where I'm still convinced that the decision to go with Ericsson rather than APT was a political decision and not one based on the merits of our proposal," he said.

Last year, France chose L. M. Ericsson of Sweden to take over an ailing state-owned manufacturer of phone equipment. AT&T, through its joint venture with NV Philips known as APT, had also offered to buy the company.

But Olson conceded that AT&T had also erred by trying to sell products designed for North American use to foreign customers.

"We've learned that at the outset you must design a product to be a global product. You don't automatically guarantee success by having designed a product for the United States that doesn't fit a market in Europe," he said.

Robert Morris, who follows the company for Prudential-Bache Securities in San Francisco, believes that AT&T might make a major acquisition in Europe to gain a stronger foothold. Indeed, speculation was circulating on the London stock market this week that AT&T may be accumulating shares of Plessey Co., the U.K.-based telecommunications group.

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