Yahoo  May 25  Comment 
AT&T (T) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
Yahoo  Apr 25  Comment 
The company has been relying on promotions and discounts to stabilize its wireless and pay-TV subscriber numbers, which have taken a toll on its margins, New Street Research analyst Jonathan Chaplin said in an interview. AT&T is fighting the U.S...
Wall Street Journal  Apr 25  Comment 
AT&T Inc.’s quarterly revenue declined as growth in the company’s streaming video service wasn’t enough to offset losses of more profitable wireless and satellite accounts.
MarketWatch  Apr 25  Comment 
AT&T Inc. shares fell 2.9% in Wednesday after-hours trading after the mobile and entertainment company reported first-quarter earnings and sales that missed expectations. Net income for the quarter was $3.7 billion, or 75 cents per share, up from...
MarketWatch  Apr 25  Comment 
Shares of Verizon Communications Inc. are up 0.7% in premarket trading Wednesday after the stock was upgraded to buy from hold at SunTrust Robinson Humphrey. "We believe fundamentals are stabilizing, as evidenced by 1Q18 results, and valuation is...
SeekingAlpha  Apr 25  Comment 
CNNMoney.com  Apr 24  Comment 
An otherwise staid antitrust trial reached a dramatic crescendo Tuesday as the trial for the Justice Department lawsuit to stop AT&T and Time Warner's merger neared its end.
Motley Fool  Apr 24  Comment 
One company has some issues, but the other is fighting for survival.


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 95.5 million wireless customers as of FY2010[1]. 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.

In 2H2010, AT&T bought wireless spectrum licenses for $1.9 billion from Qualcomm to secure the capacity for its coming 4G network. These licenses cover about 70 million people in major cities including Boston, Los Angeles, New York, Philadelphia, and San Francisco. The additional capacity will allow AT&T to provide a reliable and faster experience for users of Web-enabled phones and other mobile devices.[2]

Company Overview

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. As 0f the end of 2010, 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.

Business and Financial Metrics

Annual Financial Data, in millions[3] FY2005 FY2006 FY2007 FY2008 FY2009 FY2010
Revenue$43,862.0 $63,055.0 $118,928.0 $124,028.0 $123,018.0 $124,280.0
Gross Profit$24,672.0 $35,706.0 $72,873.0 $74,133.0 $72,613.0 $60,976.0
Operating Income$6,168.0 $10,288.0 $20,404.0 $23,063.0 $21,492.0 $19,573.0
Net Income$4,786.0 $7,356.0 $11,951.0 $12,867.0 $12,535.0 $19,864.0

Consolidated operating revenues were $31.4 billion in 4Q2010, up $847 million (2.8 percent) over the previous year’s quarter, marking the third consecutive quarter with YoY quarterly increases. AT&T saw a 9.9% growth in wireless revenues and more than a 2.8 million increase in total wireless subscribers to reach 95.5 million subscribers in service. The company had a 246,000 net gain in AT&T U-verse TV subscribers to reach nearly 3 million in service. In addition, AT&T reported record fourth-quarter total wireless churn at 1.32 percent; 1.15 percent postpaid churn, matching previous best-ever fourth-quarter level. [4]

Business Segments

AT&T’s main business units are: wireline services (including DSL and internet service), wireless services (AT&T Wireless), and its directory business.

Wireline Services (50% of revenues in 1Q10[5])

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[6]. 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[7].

Wireless Services (43% of revenues in FY2010)

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[8]. The segment benefited substantially in 2Q10 from the release of the iPhone 4, which spurred the most quarterly iPhone activations ever[9].

Wireline (45% of revenues in FY2010)

AT&T’s Wireline segment comprises of both retail and wholesale communication services domestically and internationally. This segment is divided into three product-based categories: voice, data and other. Becaues customers have been switching to wireless, cable and other Internet-based providers, revenues from the traditional voice services have been declining. The Voice sub-segment includes local and long-distance phone service for retail customers and wholesale access to AT&T's network provided to competitors. AT&T also provides data services that rely on IP-based technology and data services that rely on older, circuit-based technology. [10]

Trends and Forces

Regulatory Environment Exposure

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[11]. 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[12].

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[13]. 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[14].

High-Speed Internet and Video Investments

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.

Government Investments in Telehealth

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[15]. 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%[15].


Operator Customer Base, as of latest quarterly filing (in millions)
Verizon Wireless 92.8
AT&T 87.0
Sprint Nextel 48.1
T-Mobile 33.7[16]
Unconsolidated Minorities and Unidentified Others8.1
MetroPCS 7.3[17]
U.S. Cellular 6.2
Leap Wireless 4.6
Centennial Communications 1.1

FY2009 Monthly ARPU Churn Rate Customers Total Revenue (in millions) Subscriber Market Share
Sprint Nextel
Verizon Wireless
Leap Wireless
U.S. Cellular

AT&T competes primarily with other telecommunications services companies, including Verizon Wireless, Sprint Nextel, Leap Wireless, and MetroPCS.

  • Verizon Wireless: Verizon Wireless is a joint venture of Verizon Communications (VZ) and Vodafone Group (VOD), and has outpaced AT&T to become the leading wireless service provider in the U.S. with 92.8 million subscribers as of the end of their first fiscal quarter in 2010. AT&T benefited from the necessary divestitures when Verizon buyout of Alltel Corporation, in which it gained approximately 1.6 million subscribers primarily across rural properties[18].
  • Leap Wireless: Leap is a niche player in the telecommunications space, offering pre-paid, unlimited wireless plans, so it does not compete directly with AT&T Wireless. The company targets youth and minority markets, and its payment structure means customers avoid credit checks and contracts.
  • Sprint Nextel: Through its Sprint, Nextel, Boost Mobile, Virgin Mobile and Assurance Wireless sub-brands, Sprint Nextel competes across both wireless and wireline with AT&T. Although in recent years Spring has been hemorrhaging customers, it has invested heavily to launch the first 4G network and retain customers, and has shifted away from the post-paid segment where AT&T and Verizon Wireless dominate to focus on the pre-paid subscriber niche. As of the end of 3Q10, it has 48.8 million subscribers.
  • MetroPCS: Similar to Leap Wireless, MetroPCS focuses on the youth and minority pre-paid segment demographic, lacking the scale of AT&T, Verizon Communications, and Sprint Nextel. It has not needed to rely on massive capital expenditures as its geographic focus is the densely-populated urban market; this has helped the company achieve high margins relative to its competitors.


  1. http://www.sec.gov/Archives/edgar/data/732717/000073271711000014/ye10_10k.htm
  2. http://subscriber.hoovers.com/H/company360/fulldescription.html?companyId=11379000000000
  3. "AT&T," Morningstar Investment Research
  4. http://www.att.com/gen/press-room?pid=18952&cdvn=news&newsarticleid=31519&mapcode=financial
  5. "Wireless Broadband Growth, Further Advances in IP-Based Services, Strong Margins and Cash Flow Highlight AT&T's First-Quarter Results," AT&T Investor Relations, 04/21/2010
  6. Strong Wireless Gains, Sound Operational Execution Highlight AT&T's Third Quarter; Results Led by 2.4 Million iPhone 3G Activations, Rapid Wireless Data Growth, October 22,2008
  7. "Telecom Stocks: Verizon or AT&T? Seeking Alpha 01/17/10
  8. http://www.sec.gov/Archives/edgar/data/732717/000073271711000014/ye10_10k.htm
  9. Fawn Johnson (July 8, 2009). AT&T Disputes Antitrust Allegations Against Cell Phone Cos. Dow Jones.
  10. "FCC Concerned by Domination of Wireless Industry by AT&T and Verizon," Trefis Investment Research, 06/11/2009
  11. "AT&T Takes on Google Over 'Terrifying' Internet Rules", Bloomberg, 10/21/09
  12. "AT&T Asks Employees to Deter Net Neutrality" The Consumerist, 10/20/2009
  13. 15.0 15.1 "AT&T Sets its Sights on the 'Telehealth' Industry" New Jersey Business News, 12/06/09
  14. "T-Mobile slumps in Q1, loses 77,000 subscribers," Fierce Wireless, 05/12/2010
  15. "MetroPCS Reports First Quarter 2010 Results," Yahoo! Finance
  16. ["Telecom Services: Revising Estimates for Alltel Divestiture," J.P.Morgan Investment Research, 06/25/2010]
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