Through its subsidiaries, affiliates, and operating companies, holding company AT&T is the industry-leading provider of wireline voice communications services in the US. Customers use AT&T-branded telephone, Internet, and VoIP services; it also sells digital TV under the U-verse brand. Key markets include California, Illinois, and Texas. The company's corporate, government, and public sector clients use its conferencing, managed network, and wholesale communications services. Subsidiary AT&T Mobility is the second-largest US mobile carrier by both sales and subscriptions (after Verizon Wireless). It provides mobile services to more than 126 million subscribers.
AT&T's wireless segment outpaced the company's wireline business in 2014, accounting for 56% of the company's revenue. The wireless business grew at a 6% rate for the year while wirelene declined 1%. The wireline segment is composed of switched and dedicated network transport, dial-up and broadband Internet access, network integration, data equipment sales, and converged video communications.
The company has spectrum licenses in all 50 US states, Puerto Rico, and Washington, DC. Its wireless services and mobile broadband services are available in about 200 countries.
Sales and Marketing
AT&T has pushed its mobile services through increased advertising and marketing efforts that tout the benefits of the mobile Internet. A key component of this was an exclusive agreement with Apple to carry the iPhone in the US from the time of its debut in the summer of 2007 until early 2011 when top rival Verizon also began to offer the device. AT&T reaped significant rewards from this partnership, which helped drive the growth and profits of its wireless business. It spends about $3 billion a year on advertising.
AT&T's revenue increased nearly 3% to $132.4 billion in 2014 from 2013. The overall rise was helped by a 47% jumped in equipment revenue as postpaid customers bought devices on installment instead of the device subsidy model. The company's U-verse offerings were strong sellers, but legacy wireline continued to decline.
At $6.2 billion, the company's 2014 net income was just a third of what it reported in 2013. The 2013 profit included a gain related to pension and post-employment benefit plans. In 2014, AT&T had higher cost of sales and general expenses compared to 2013.
Cash flow from operations fell to about $31.3 million in 2014 from $35 million in 2013.
AT&T is building its fiber-to- the-home technology to provide residences and business with higher Internet speeds, which will enable other technologies. The $4 billion program, called Project VIP, is aimed at bringing more customers to IP-based services as well as to subscribe to higher value entertainment services. The company ended 2104 with 12.2 million Internet subscribers and about 6 million video subscribers. AT&T has stepped up expansion and adjusted rates of its high-speed Internet service in areas where it competes with services such as Google Fiber.
The company bid more than $18 billion for spectrum auctioned by the Federal Communications Commission (FCC). AT&T wants to maintain its high-speed network to carry large amounts of video, which accounted for more than 50% of its network traffic in 2014.
AT&T is seeking to diversify its revenue streams through acquisitions. By the end of 2015, the company expects that wireless and wired business services will be its biggest source of revenue, followed by US TV and Internet service, US consumer mobile, and Latin American TV and mobile.
As wireline services decline, AT&T is divesting some those assets. In October 2014, it completed the sale of its Connecticut wireline operations to Frontier Communications for $2 billion.
Mergers and Acquisitions
AT&T has been using acquisitions to build its mobile data capabilities and expand its service area and subscriber numbers. In one of its biggest acquisitions, the company bought satellite pay-TV provider DIRECTV for $48.5 billion in mid-2015. The combination enables AT&T to offer new packaged services and deliver content on mobile devices, TVs, laptops, cars, and airplanes.
Two other significant acquisitions will make AT&T one of the biggest mobile carriers in Mexico almost overnight (as corporate dealings go). The company closed its purchase of Iusacell in early 2015 and should close on its Nextel Mexico purchase by the middle of the year. With the transactions, AT&T's nearly nationwide service area in Mexico will cover 100 million people.
In 2014 it purchased Leap Wireless (which operates under the Cricket brand) for some $1.2 billion in an effort to build its profile in the prepaid market and expand its LTE network.
A move that could affect AT&T and other carriers came in early 2015 when the FCC proposed regulating the Internet under the Telecommunications Acts of 1934. The proposed regulation is to ensure net neutrality. AT&T has filed suit against the proposed regulation. The company is challenging is challenging the FCC's reclassification of the Internet as a telecommunications network.
Previously, a deal to buy smaller rival T-Mobile USA from Deutsche Telekom fell apart amid strong government opposition in 2012. AT&T had to pay Deutsche Telekom a break-up fee valued at about $6 billion, including $3 billion in cash, along with wireless spectrum licenses and a national roaming agreement worth another $3 billion.