AT&T’s (NYSE: T) rumored plan to reduce the number of direct suppliers it works with to about 30 — two for each of about 15 technology categories — “shouldn’t be a big deal,” according to Jeffries analyst George Notter.
In a research note this morning, Notter pointed out that AT&T already gives the vast majority of its business to two key vendors. “We’re not sure there’s anything really new here,” he wrote. “We think it’s basically just ‘business as usual’ for AT&T.”
He also said vendors are already being notified of their new chosen roles and that a public announcement should be coming soon.
Though some see AT&T’s plan as partly motivated by the desire to weild increased pricing pressure with vendors, Notter disagrees, arguing that the plan’s top two drivers are likely energizing key vendors to keep up R&D and reducing the amount of time AT&T spends with “non-strategic” vendors.
In addition, there may be a number of exceptions to the new rules, including the retention of relationships needed to maintain and upgrade existing network equipment. Earlier reports had suggested that AT&T may encourage its key suppliers in each area to partner with other vendors whose technology AT&T favors.
Alcatel-Lucent, already perhaps the carrier’s most strategic supplier (its role as chief integrator of AT&T’s fiber-to-the-node buildout may have served as the model for the supplier relationship structure now in the works), may also be the biggest beneficiary of the new initiative, Notter pointed out, since it is likely to be named to multiple technology areas.
Adtran could potentially stand to lose some business, Notter said, echoing an earlier report from another analyst. But the impact is likely to be very minimal, he said, further pointing out that AT&T’s plans are not likely to be disruptive to the vendor community in general.
“Frankly, it’s hard to think of many number-three vendors in particular product domains that would get excluded from doing any material amounts of business with AT&T because of this program,” he said.