UniDial, Bell Atlantic in $300 Million LocalResale Deal

Posted: 06/1999

UniDial, Bell Atlantic in $300 Million Local
Resale Deal
By Ken Branson

UniDial Communications Inc., Louisville, Ky., has agreed to pay Bell Atlantic Corp.,
Philadelphia, $300 million over five years for the right to resell Bell Atlantic’s local
services in the regional Bell operating company’s (RBOC’s) 14-state territory.

The deal comes at a time when many in the industry question the utility of local resale
as anything other than a market-entry strategy. However, Jonathan B. Smith, Bell
Atlantic’s director of segment marketing and customer communications, says he thinks it is
still possible to make money in local resale.

"I’ve heard the horror stories," Smith says. "But I’ve talked to a lot
of customers who say they are making money on local resale."

"It’s something to grasp at now," says Ernest B. Kelly III, president of the
Telecommunications Resellers Association (TRA). "It’s the first encouraging sign
we’ve seen in local resale."

Kelly says he thinks Bell Atlantic wants to retain its 100 resellers, and also says
Bell Atlantic’s deal with UniDial signals opportunities for all resellers.

"Everybody and their brother should take a look at it (the UniDial/Bell Atlantic
deal), and then go back to their suppliers and see if they can negotiate similar
provisions," Kelly says.

Smith says discount rates in his company’s territory range from 15 percent to 25
percent, but Bell Atlantic will give UniDial a considerable discount on top of that–10
percent the first year, 13 percent the second year and 15 percent during each of the
following three years. The discounts depend on UniDial meeting annual volume commitments
for reselling local lines.

In a prepared statement, the two companies say this agreement is the largest resale
agreement ever signed by Bell Atlantic. J. Sherman Henderson III, president and CEO of
UniDial, says, "At UniDial, we consider local service a critical part of our future
as a full-service communications provider. We’ve built our business on the idea that
customers want a truly integrated product set for local, long distance and data services.
Local service is an essential piece of the puzzle to be truly a one-stop shop for our
customers."

"Local service is a viable business and Bell Atlantic intends to be a leading
wholesale provider," says Jack Goldberg, Bell Atlantic’s president-Telecom Industry
Services division. "This deal demonstrates once again that Bell Atlantic is making
every effort to work with UniDial and other resellers to promote the kind of competition
that will move the whole industry forward."

A UniDial spokeswoman adds that her company expects to add 200,000 new access lines
under the agreement.

Smith says Bell Atlantic is prepared to negotiate similar deals with other resellers.
Bell Atlantic has sold about 725,000 lines to about 100 resellers, according to the press
release the two companies issued announcing the agreement.

UniDial prides itself on being a leader in total service resale, and its executives
believe they can make a profit through that medium. A company spokeswoman says UniDial has
"re-tooled" itself recently, orienting its efforts toward businesses. The
company claims 250,000 customers, of which approximately 80,000 are small and medium-sized
businesses. In addition, the company, traditionally served entirely by agents, now employs
full-time salespeople in several branch offices.