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 140 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’s acquired Time Warner Inc. in 2018 after winning a court challenge by the US government. The deal added Time Warner’s content such as HBO and CNN to AT&T’s distribution capabilities.
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.
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 nothing if not ubiquitous. The company is a big advertiser to businesses and consumers with presence on TV, print, and online. The company operates its own retail stores where 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.
AT&T’s revenue marched steadily higher from 2013-2016, growing an average of about 7% a year, before taking a step back in 2017.
AT&T's revenue slipped 2% in 2017 to $160 billion from 2016. Service revenue, which account for about 90% of the company’s total, fell 2% on continued declines in legacy wireline voice and data products and lower wireless service revenues as customer move to unlimited plans. There were, however, higher revenue from video and strategic business services. Equipment sales rose slightly in 2017 from 2016, boosted by higher volume in Mexico.
AT&T posted $29 billion in revenue for 2017, a 120% increase from 2016. The company paid about $21 billion less in taxes in 2017 because of the enactment of the US Tax Cuts and Jobs Act late in the year.
Cash from operations dropped to $39.1 billion from $39.5 billion because the company issued about $1 billion in bonuses to employees following tax reduction legislation. Cash used in investing in 2017 was about $20 billion, mostly for capital expenditures for networks and video services. Free cash flow was about $21 billion in 2017.
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. AT&T added to it content capabilities with the 2018 acquisition of Time Warner and its properties such as HBO and CNN. With those assets in hand, AT&T sold its stake in the Hulu streaming service to Hulu for $1.4 billion. AT&T said it would use the proceeds to reduce debt.
With unremitting competition from its wireless rivals such as Verizon and Sprint as well as content providers like Netflix and Amazon, AT&T sees the Time Warner deal as crucial to its future. It argues that having content to send over its pipes would make it a more effective competitor rather than a monopolist.
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.
In 2018, AT&T began work on FirstNet, a government funded nationwide network for first-responders and public agencies. A possible bonus AT&T would be excess wireless capacity that it could use for its paying customers.
AT&T was testing 5G network technologies in 2018 and expected to have operational mobile 5G networks in 12 US cities by the end of the year. Besides providing faster speeds for mobile phones, 5G could help driverless cars and smart cities technologies communicate. AT&T expanded an agreement with Crown & Castle to provide AT&T with access to cell towers to add 5G technologies.
As US companies enter the first full year under the US Tax Cuts and Jobs Act legislation, AT&T expects more investment in communications technologies. The company said it would add $1 billion to its capital expenditures for 2018 as a result of the tax act.
Mergers and Acquisitions
AT&T acquired AppNexus, a digital advertising firm, in 2018 for a reported price of $1.6 billion. With AppNexus, AT&T seeks to speed the growth of its advertising platform. The purchase brings to AT&T some 400 software engineers and product managers with experience in machine learning and predictive analytics, advertising technology, and video. AT&T intends to integrate AppNexus's technologies with AT&T’s first-party data, premium video content, and distribution. The deal closed in the 2018 third quarter.
In 2018 AT&T acquired FiberTower Corp. for $207 million. AT&T plans to use the millimeter wave spectrum obtained in the deal to help meet its goal of being the first US company to introduce mobile 5G in a dozen markets by late 2018.
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's acquisition of Time Warner for $85 billion, a process that began in 2016, concluded in 2018. The closing was preceded by a lawsuit brought by the US Department of Justice, which contended the deal would reduce consumer choice. AT&T won at trial and quickly concluded the transaction. The DoJ, however, filed another suit against the deal. As it stands, the merger united 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 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.
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