AT&T Kathleen Early Class Two Howard Anderson
“…It was… “ the best of times, it was the worst of times, It was the age of wisdom, it was the age of foolishness, It was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, It was the Spring of Hope, it was the Winter of Despair
“We had everything before us, “we had nothing before us….” AT&T Problem: Long Distance, very quickly, goes from a cash cow/profitable to …. Barely profitable. … and they are not alone.
A T & T Sales$67 Business: 50% Business Growth: - 11% ($34 B) 2001: expected: - 17% ($28.2 B) Debt: $62 B ( MediaOne, TCI) Wireless: $10.4 B, up 35% Broadband: UP 10.4% Cost of new local subscriber: $600
ATT Long Distance: will shrink: $6 B ($29B)
Example: Worldcom Revenue by segment Voice % Data % International % Internet Related Serv % Wholesale & Consumer Other % Total %
What do we learn? 1. Long Distance is a pure commodity (Ellen Hancock: $.05/mile OC48 - $.01) 2. AT&T’s issues are the same as Worldcom, Sprint, etc : Fortune Favors the Bold… A. Buy new competitors: McCaw, Teleport. B. Buy cable properties: TCI, MediaOne C. Build Internet Businesses D. Assume slower deterioration of LD; get control of end user.
The Market Will Be Heard –Stock Mar 99Feb01 $60$21 Market Cap$240 B$81 B Lost: $160 Bill + $100 Bill ( debt) - =trouble.
The “Hail Mary” Pass ATT: 4 companies Wireless: $9.6 Bill – 18.6% Margin “A” Broadband: $9.3 B – 24.3% Margin “A-” Consumer$19.B 41% Margin “C” Business$28.4B 36% Margin “B- Tot:$66 B
Restructure: Wireless: $9.6 3X$27b Broadband b Consumer $ b Business X 56 Total Breakup Value: $129 B or 50% premium
Wireless Industry Subscribers U.S Source: Yankee Group
Global Wireless Forecast (Billions of Subscribers) – – –Source: Yankee Group
Internet Influence 2000 Wireless Internet users:660 M 1 billion web pages 75 million host computers
Questions: 1. What is AT&T’s Internet Strategy? 2. How has it changed? 3. What will be different with 4 companies? 4. With companies like PSI in the tank, what part of the market looks attractive? 5. At some point, will you not be competing with your former sister divisions?