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AT&T Inc. Strategy AnalysisKYLE HUGHES AND MAIREAD COOGAN DECEMBER 7, 2016
Industry AnalysisPORTER’S FIVE FORCES ANALYSISPESTEL ANALYSIS
STRATEGYEXPERT.COM3
Porter’s Five Forces
THREAT OF NEW ENTRANTS - HIGH• High capital costs • High market competition
SUBSTITUTE PRODUCTS - HIGH• Customer's short-term
contracts• Price wars between large
wireless phone service providers, mainly Apple's smartphones and Sprint's pay-as-you-go plans.
BATGAINING POWER OF SUPPLIERS - LOW• Customers continue to be
price sensitive in selecting offerings, especially in the wireless area, and access to video and broadcast services.
• Expect continued pressure on pricing during 2016 in response to intense competition.
BARGAINING POWER OF BUYERS - HIGH• Consumers continue to
demand instant connectivity and yet AT&T faces a regulatory environment that appears increasingly unfriendly to investment in broadband services.
COMPETITION•Competition continues to increase for communications and digital entertainment services. Technological advances have expanded the types and uses of services and products available.
•Major competitors include: Verizon Wireless, Sprint, T-Mobile/Metro PCS, and many regional providers of cellular, PCS and other wireless communications services and resellers of those services.
“The goal of competitive strategy for a business unit in an industry is to find a position in the industry where the
company can best defend itself against these competitive forces or
can influence them in its favour.”Micheal Porter
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more useful tools, templates and resources
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[date] [Name] STRATEGYEXPERT.COM 4
P.E.S.T.E.L Analysis
Economic• 2015 operating revenues increased 10.8% / $14,354 (in millions).• Company Caution: Incurred major transition costs with the 2015 development in Mexico. • Stock Prices: $38.61 (12/2/16)
Social• “We expect that all our major customer categories will continue to increase their use of Internet-based broadband/data services. We expect continuing declines in traditional telephone service revenues.”
Environmental
• Trends toward sustainability• Reducing carbon footprint worldwide• Alternative energy sources available-
costly• Government regulation on greenhouse
gas emissions• EPA Smartway program (transportation
emissions management)-AT&T is a participant
Legal• Regulatory burdens that are no longer appropriate in a competitive telecommunications market • 2015 FCC’s released order – significantly expanded the FCC’s existing authority to regulate the provision of fixed and mobile broadband Internet access services. AT&T and other providers challenged the FCC’s decision before the U>S> Court of Appeals for the D.C. Circuit. Look up decision – supposed to be announced early 2016
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more useful tools, templates and resources
Not to be sold or published.
Political• AT&T subsidiaries operating within the U.S. are subject to federal and state regulations. AT&T subsidiaries operating outside the U.S. are subject to national and supranational regulations in the markets where service is provided. • Telecommunications Act of 1996
Technological• Communications industry continues to
move toward Internet-based technologies that are capable of blending traditional wireline and wireless services.
Capability AnalysisVALUE CHAIN ANALYSISVRIO ANALYSIS
STRATEGYEXPERT.COM
Value ChainAccess-Development to Rural/Underserved Areas
Company Energy Use
Compensation & Benefits
Customer Privacy
Prim
ary
Activ
ities
Supp
ort
Activ
ities
AT&T Network Employees Supply Chain Communities Customers
Education
Greenhouse Gas EmissionsNetwork Reliability
Network/Data Security
Product Design: Energy Efficiency
Product Recycling/Reuse
Social/Environmental Innovation
STRATEGYEXPERT.COM7
V.R.I.O
Core Competencies Valuable Rare Costly to Imitate Organized to Capture Value
Customer Service × ×High Quality
Voice/Data Service × × ×Combination of Services × × ×
Brand Recognition × × × ×
Competitive Advantage High Quality Voice and Data Service
◦ 4G LTG Speeds◦ HD Voice◦ VoIP
Combination of Services◦ Wireless, TV, Internet, E-Mail, Home Phone, Digital Life and Bundles
Value Proposition AT&T's Size
◦ November 3, 2016 - AT&T was the largest US telecommunications (or telecom) player. Verizon was the second-largest player, and T-Mobile was the third-largest player by market capitalization. Sprint’s market capitalization was lower than T-Mobile’s.
AT&T's Valuation Multiples◦ AT&T was trading at a forward PE (price-to-earnings) multiple of ~12.24x, higher than Verizon’s ~11.71x.
AT&T’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) metric was ~6.28x, higher than Sprint’s and T-Mobile’s ~5.09x and ~6.06x, respectively.
◦ November 3, 2016 - AT&T’s dividend yield was ~5.4% higher than Verizon’s ~4.9% dividend yield.
Corporate Strategy Assessment CORPORATE ADVANTAGE VERTICAL INTEGRATION
Corporate Advantage
AT&T's Global Network Reliability increases global communications networks and has revolutionized the way the world lives, works and plays.
Customers in 29 markets can download an HD movie in 36 seconds, a TV episode in 3 seconds and 25 songs in 1 second.
High-speed mobile internet network covers nearly 380 million people and businesses across the U.S. and Mexico.
Advanced services delivered to nearly 3.5 million businesses on 6 continents.
Vertical Integration Proposition: AT&T Secure Voice Platform protecting customers telephone information and identity by offering a private secure defense platform and eliminating robocalls and identity theft.
◦ Similar to AT&T's NetBond for businesses In-house Product Design and Supply which would allow for easier coordination and communication about product sales targets and customer needs, while increasing energy efficiency.
Current:
AT&T is protecting data on mobile devices by offering the Skycure Mobile Threat Defense Platform.
AT&T outsources to equipment suppliers for the majority of products.
Recommendations Stay Safe
◦ Vertically integrate security platform for individual and family plan customers.
Go Global◦ Continue to expand U-Verse high-speed broadband and video offerings.◦ Continue hot-spot merging with companies.
Unify◦ Develop IP-based services that allow customers to unite their home or business wireline services with their wireless
service.◦ Focus on blending traditional wireline and wireless services.◦ Vertically integrate product design and supply.
Fight for Growth ◦ Mature telecommunications space via increased spectrum, capacity, and data services.
