About BellSouth Business Systems, Inc.

If there's a way to communicate, there's a good chance AT&T Inc. provides it. The company offers services via wireless, wireline, satellite, WiFi, IP network, Virtual Private Network, and fiber optic cable. The company is the biggest wireline voice provider and the second biggest wireless provider (behind Verizon Communications ) in the US with more than 135 million subscribers. It offers digital TV (as well as voice and internet service) through its U-verse brand and satellite Pay TV through DIRECTV. AT&T in October 2016 agreed to buy Time Warner Inc. for $85 billion. The deal would unite AT&T's distribution capabilities with Time Warner's content, which includes HBO.

Operations

AT&T's Business Solutions segment is its biggest unit, generating about 45% of revenue. The unit provides services to business, governmental, and wholesale customers, and individual subscribers who purchase wireless services through employers.

The Entertainment Group accounts for about 30% of revenue by providing video, internet, interactive and targeted advertising services, and voice services to US residential customers. The group includes AT&T's DIRECTV and U-verse operations. The Consumer Mobility business, about 20% of revenue, provides wireless services to consumers and wireless wholesale and resale services in the US. The international unit, which consists mostly of operations in Brazil and Mexico, accounts for the remaining revenue.

Geographic Reach

Dallas, Texas-based AT&T has spectrum licenses in all 50 US states, Puerto Rico, and Washington, DC. About 95% of AT&T's revenue is generated in the US. Its wireless services and mobile broadband services are available in about 200 countries, but most of its international revenue comes from Mexico and Brazil.

Sales and Marketing

AT&T is a big advertiser to businesses and consumers with presence on TV, print, and online. The company operates its own retail stores. It offers smartphones from major manufacturers such as Apple and Samsung. The company spends more than $3.5 billion a year on advertising, about $1 billion more than wireless rival Verizon Communications.

Financial Performance

AT&T posted $164 billion in revenue in 2016, a 12% gain from 2015, continuing a seven year string of increases. The company's profit, however, was 3% lower in 2016 than 2015.

AT&T's 2015 acquisition of the satellite DIRECTV service fueled the surge in revenue in 2016. The acquisition led to a 45% increase in sales for AT&T's entertainment unit in 2016. The segment also had growth in consumer IP broadband, offsetting reduced revenue from legacy voice and data products. In its business unit, AT&T's IP broadband (virtual private network and Ethernet-related) services brought in more revenue. Wireless revenue suffered as AT&T offered calling plans with lower monthly rates to counter offers from competitors. Revenue fell in the consumer mobility business as customers moved to the business solutions segment and Mobile Share plans. Plans that allow subscribers to buy wireless service through employer-sponsored plans for a reduced price are in the business solutions segment.

Average revenue per user (ARPU), a key measure for carriers, has trended lower for AT&T. Postpaid phone ARPU was $59.45 in 2016, down from $60.45 in 2015 and $62.99 in 2014.

AT&T ended subsidizing phone purchases in early 2016. Now customers either buy phones from the company on installment or use phones bought elsewhere. At the end of 2016, more than 50% of postpaid smartphone customers were on an installment program compared to about 45% the year before. More than 90% of postpaid smartphone adds and upgrades during 2016 were either on installment plans or had their own phone compared to 77% in 2015. Customers who have their own phones don't generate equipment revenue or expense for AT&T, but the service revenue improves its margins.

Net income slipped 3% to about $13 billion in 2016 from 2015. Higher expenses in 2016 came from the acquisition of DIRECTV and the acquisition of content for entertainment purposes. The company also has greater noncash financing-related costs related to pension and post-retirement benefits.

Cash flow from operations rose to about $39 billion in 2016 from $36 billion in 2015. The increase was from the DIRECTV acquisition and the timing of working capital payments.

Strategy

As the US wireless phone market becomes saturated (AT&T and Verizon count more than 280 million subscribers between them), carriers are looking for ways to generate more traffic on their networks to generate revenue. AT&T Inc. bought a content carrier, DIRECTV, in 2015. Its acquisition of Time Warner and its properties such as HBO is pending. DIRECTV provided a revenue boost 2016. AT&T's network is built to support video and the company has already launched a streaming service, DIRECTV Now.

AT&T has spent billions in capital expenditures on its LTE network, buying spectrum, and extending fiber optic lines to more than 12 million locations. The company is implementing software-defined networking technologies so changes to the network can be done through software, not hardware. That lowers costs of maintaining and upgrading the network. To make sure it all works, AT&T had undertaken a massive retraining program to move workers to new roles and out of ones that are going the way of copper landlines.

The company has outfitted nearly 5 million cars in deals with automakers. It bets that connected car agreements provide the opportunity to develop retail relationships. Beyond that, AT&T's connected cars strategy extends the networks that connect autonomous vehicles and other parts of the transportation infrastructure.

Wireless phone service is still the bulk of AT&T's business and the company intends to maintain its position as an industry leader. In 2016 the company introduced new plans such as Mobile Share and AT&T Next to keep customers and attract new ones. It gained about 8 million subscribers with a plan that allows for unlimited wireless data when combined with the company's video services. The has invested some $27 billion in spectrum over the past five years. It has 40 MHz of fallow spectrum.

AT&T continues to develop 5G network technology, which is to offer faster speeds and more capacity than current 3G and 4G networks and will enable new applications. The company has set up test works in several US cities including Austin, Texas and Indianapolis, Indiana.

Mergers and Acquisitions

AT&T extended its efforts to use software to manage networks with its acquisition of the Vyatta network operating system from Brocade Communications. The deal, reached in June 2017, includes the vRouter product line; AT&T intends to hire employees associated with the business. AT&T expects the Vyatta platform to help virtualize its network and control it with software. The deal was expected to close in summer 2017.

In April 2017, AT&T said it would spend $1.25 billion to buy Straight Path Communications, which owns licenses to wireless spectrum. That is until rival Verizon Inc. swooped in with a $3.1 billion bid. Verizon gets Straight Path's large holdings of 28 GHz and 39 GHz millimeter wave spectrum used in mobile communications.

AT&T agreed to buy Time Warner for $85 billion in 2016 in a deal that would unite a creator of popular content with a distribution network that would reach screens of all sizes. Time Warner's holdings include HBO, CNN, TNT, TBS, and the Warner Bros. Studio, which produces movies such as the Harry Potter franchise and TV shows (such as the Big Bang Theory ). The blockbuster deal will face scrutiny from members of Congress and regulators concerning the concentration of end-to-end content creation and distribution.

The deal for Time Warner followed AT&T's acquisition of 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 made AT&T one of the biggest mobile carriers in Mexico. The purchases of Iusacell and Nextel Mexico in 2015 brought AT&T nearly nationwide coverage of Mexico and about 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.

The deal for Time Warner followed by about a year AT&T's acquisition of 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 made AT&T one of the biggest mobile carriers in Mexico. The purchases of Iusacell and Nextel Mexico in 2015 brought AT&T nearly nationwide coverage of Mexico and a potential customer pool of 100 million.

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.

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BellSouth Business Systems, Inc.

2180 Lake Blvd Ne
Brookhaven, GA 30319-6004
Phone: 1 (404) 829-8000

Stats

  • Employer Type: Public
  • V Pres: Paul Harmon
  • Employees: 2,000

Major Office Locations

  • Brookhaven, GA

Other Locations

  • Fort Lauderdale, FL
  • Tampa, FL
  • Augusta, GA
  • Gulfport, MS
  • Charlotte, NC
  • Greensboro, NC
  • Raleigh, NC
  • Charleston, SC
  • Florence, SC
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