At&T Case Analysis

Topics: Telephone, Bell System, Broadband Internet access Pages: 10 (3122 words) Published: May 8, 2006

AT&T was started over 130 years ago in 1875. It started out when Alexander Graham Bell began work on the telephone. Initially it just made telephones and licensed to companies to •Many changes in the company structure

•6,000 patents
•7 Nobel prizes


I.General Environment
A.Technology –Alexander Graham Bell invented the telephone and earned the patent in 1875. AT & T was incorporated in 1885 with objective of building and operating long distance network. AT & T was the telecommunication leader until the late 90s. Here is the list of AT & T technological movement: 1925 virtually monopoly on local telephone service, 1926 begins telephone service via two-way radio, 1947 transistor invented at Bell Labs, the first microwave relay system, 1962 launches its first satellite, 1977 installs the first fiber optic cable, 1992 starts AT & T Wireless after acquires McCaw Cellular Communications, 1996 launches AT & T Internet service, 1999 forms AT & T broadband after acquires cable company TCI. Technology is the driver of the telecommunication industry. Without highly advanced technology and services, there would be no product to sell.

B.Demographic trends – For a long time, AT & T was virtually monopoly on local and long distance service. After the antitrust threats in 1913, AT & T allows competitors to interconnect with the Bell System. It does not stop AT & T's rapid growth. The penetration of telephone service into American household increased from 50% in 1945 to 90% in 1969. Competition became established in the general long distance service by the mid-1970s when FCC signaled its interest in more competition and allowed competitors to use some of the Bell Lab's technology. AT & T's long distance market share fell from over 90% in 1984 to 50% in 1996. By the late 90s, AT & T realized its technology and service areas are lagging, it starts series of acquisitions. Despite all the acquisitions, AT & T is constantly losing its market shares in all areas but Wireless sector. This leads AT & T to split the company into four parts and refocus their businesses on their service areas, which are AT & T Broadband, AT&T Wireless, AT&T Business Services, and AT&T Consumer Services.

C.Economic trends – With the new technologies and more competitors entering the markets, AT&T has to drop their service pricing to be competitive. AT&T's long distance service is as profitable as it used to be. Two areas of the business that were growing were AT&T Wireless, expected to grow about 30% in 2000, and AT&T high-speed services, sold under the brand Excite@Home, which was gaining customers rapidly. AT&T's third quarter revenues, totaling $16.97 billion, increase only slightly by 3.7%. However, the earning 38 cents per share were down 24% compared to the same period a year ago. The breakup was to give the individual companies more flexibility in raising money for repaying debt or for acquisitions as well to boost the company's stock price by separating the various divisions into more easily understood stand-alone business. Given the disappointing performance of the AT&T, few analysts expected that valuations would be higher just because they were managed as separated business.

D.Political/Legal –In 1907 AT&T's President Theodore Vail formulated the principle that the telephone and its technology would operate most efficiently as a monopoly providing universal service. Initially, the U.S. government accepted this principle, which led to an agreement in 1913 known as the Kingsbury Commitment. AT&T agreed to connect competitors to its network and divest its controlling interest in the Western Union Telegraph. Several times over the next few decades, federal administrations investigated the U.S. telephone monopoly. The only notable result, however, was an antitrust lawsuit filed in 1949, alleging company abuses. This led to a settlement in 1956, whereby AT&T agreed to restrict its activities to the...
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