AT&T Inc. (NYSE:T) is a U.S. telecommunications services provider, and the second largest U.S. wireless carrier in the United States, with 92.8 million wireless customers as of 3Q10 . AT&T operates across four segments: Wireless, Wireline, Advertising Solutions, and Other. Its Wireless segment provides both wireless voice and data communications services across the U.S. as well as abroad through roaming agreements. Wireline has historically been AT&T's core business, although given the secular trend away from landlines the company has invested heavily in AT&T "U-Verse", which offers high-speed internet, phone, and television services in one package using one protocol. Advertising Solutions accrues directory and Internet-based advertising through the publication of its White and Yellow Pages directories. Through Other, it provides results from Sterling Commerce.
Within its Wireless segment, AT&T has invested heavily in mobile devices, entering the smartphone industry through a lucrative partnership with Apple in 2007. As of September 2009, 50 million iPhone have been sold and over 20 billion application have been downloaded, granting AT&T a substantial recurring revenue stream, and according to comScore, 43% of all U.S. smartphone customers as of early 2010. The success of the iPhone sales through its distribution channels has also given AT&T the opportunity to enter the high margin data services business, which includes Web surfing and email use.
In March 2010, it was announced that Apple's next iPhone, to be released in the summer of 2010, was being programmed to work with CDMA, a wireless network that make the iPhone compatible with other wireless carriers, instead of GSM, AT&T and most other carriers' network of choice. As a result, many believe its exclusive contract with the iPhone is set to expire in 2010. Other indications include AT&T's released plans to launch a slew of smartphones from Dell and Motorola running on Google's Android-operating system to cushion the potential migration of iPhone users to other networks. In 2010, AT&T will look to drive data revenue by investing heavily in mobile application development for Android and increasing the core fiber optic capacity of its network.
AT&T traces its roots to the beginning of the telephone era in 1876. From its founding through the 1970s, it dominated the telephone industry as a monopoly. In 1974, however, the Federal Government filed an anti-trust suit and in 1984 the company was forced to break into smaller pieces. Those seven pieces were termed Regional Bell Operating Companies (RBOCs), and they conducted business autonomously for about a decade.
In the 1990s, SBC began buying former AT&T subsidiaries and in 2005 it purchased what remained of AT&T Corp. The resulting company was rebranded AT&T Inc. Finally, in December of 2006, AT&T Inc. purchased BellSouth, creating the corporation that exists today. At this point, 5 of the 8 spin offs of the original AT&T have been reunited under the new AT&T Inc brand, though competition from other companies and technologies has calmed fears of a re-emergence of the original monopoly.
|Annual Financial Data, in millions||FY2005||FY2006||FY2007||FY2008||FY2009|
Consolidated operating revenues were $31.6 billion in 3Q10, up $847 million (2.8 percent) over the previous year’s quarter, marking the third consecutive quarter with YoY quarterly increases. Although operating expenses also rose, AT&T managed a YoY increase in operating income, with $5.5 billion up from $5.4 billion. Its wireless segment also saw a 2.6 million increase in total wireless subscribers, reaching 92.8 million subscribers in service. AT&T witnessed its seventh consecutive quarter of a YoY increase in post-paid Average Revenue per User (ARPU) to $62.84. The third quarter also included a 1.32% total wireless churn, AT&T's best third-quarter result ever.
AT&T’s main business units are: wireline services (including DSL and internet service), wireless services (AT&T Wireless), and its directory business.
The wireline unit has three core sources of revenue: voice (includes local and long-distance), data, and other services. Other services include satellite video, network, server, data storage and other hosting services.
As of June 2009, AT&T provides broadband services to approximately 16 million customers, keeping its rank as the largest U.S. broadband provider. Its U-verse TV service is an extension of the fiber-to-the-node (FTTN) model, an infrastructure to support FTTN has significantly higher long-term costs than the fiber-to-the-home (FTTH) model used by Verizon Communications. As of December 2009, U-Verse has 2 million subscribers, significantly less than Verizon's FiOS 3.4 million FiOS customers.
AT&T provides local and long-distance wireless communication voice and data services. With over 90.1 million wireless subscribers as of the end of 2Q10, it is the second largest U.S. wireless carrier by subscribers, following Verizon. The segment benefited substantially in 2Q10 from the release of the iPhone 4, which spurred the most quarterly iPhone activations ever.
AT&T’s advertising & publishing business comprises all of its directory services, including traditional phone books and electronic and internet publishing. Its Yellow and White Pages continue to dominate the markets in which they operate and its internet outfits, especially YELLOWPAGES.COM, are also industry leaders.
AT&T Inc.’s businesses are subject to many levels of complex regulation and any significant changes could have a major impact on the company as a whole. In the 1990s, the FCC began implementing policies that encouraged competition for local telephone service providers, epitomized by the Telecom Act of 1996. The new rules imposed on the industry during this period stifled growth and had a negative impact on earnings for AT&T. Increased regulation or a break-up of the industry like what happened to AT&T in the mid-1980s would be very harmful to all wireless carriers as it would reduce margins considerably.
In early July 2009, both the FCC and DOJ were asked by Senator Herb Kohl of Wisconsin to investigate anti-competitive practices in the cell phone industry, given its dominance by four companies: AT&T, Sprint, T-Mobile USA, and Verizon Wireless. According to the FCC, industry concentration, as measured by the Herfindahl-Hirschman Index, has increased 32% since 2003 primarily as a result of consolidation in the space.
Additionally, AT&T and other broadband network providers have been under scrutiny by the FCC for what may be preferential treatment to their own subscribers. For example, AT&T could offer video services at high speeds to subscribers, and make those of its competitors unavailable or slower. With strong support from the U.S. Congress, the FCC may regulate these networks to enforce net neutrality, a decision that could drive up consumer prices.
AT&T has made significant investments in developing high-speed internet and video offerings to compete with cable companies such as Time Warner Cable and Cablevision Systems. At the core of this drive is Project Lightspeed, AT&T’s initiative to provide broadband to 19 million households. As mentioned above, AT&T has decided to pursue the FTTN model, allowing it to build its network quicker and less expensively than some of its competitors.
Furthermore, AT&T is betting heavily on being able to provide high-quality video services to its customers. AT&T was involved in a bundling agreement with Echostar Communications to provide broadband and telephone services along with Echostar's satellite television. The laying of their own fiber optic wires puts the future of this relationship at risk. AT&T’s U-verse competes with Verizon’s FiOS and Docsis 3.0 which is provided by cable companies.
In an effort to help lower costs and improve the quality of medical care, many telecommunication companies are partnering up with tech companies to spur their remote client monitoring businesses and take advantage of the $6 billion government spending in telehealth. AT&T research scientists have embedded pressure sensors in the soles of "smart slippers" that detect if a patient's gait is unusual or offbeat, notifying a doctor via e-mail and potentially preventing injury or future costly medical care. Consultancy firm PriceWaterhouseCoopers expects significant growth in this sector, amounting to $1.8 billion by 2013 from $77 million in 1995, as well as significant cost-cutting potential, with potential savings of 20-40%.
|Operator||Customer Base, as of latest quarterly filing (in millions)|
|Unconsolidated Minorities and Unidentified Others||8.1|
|FY2009||Monthly ARPU||Churn Rate||Customers||Total Revenue (in millions)||Subscriber Market Share|