AT&T Sees Growth Amidst Price War in Consumer Telecommunications Business

Strategic Insights -

AT&T, led by Chairman Michael Armstrong, has reported mixed results in its third-quarter earnings, with the company's traditional consumer voice business suffering due to a price war sparked by MCI WorldCom. However, cost-cutting measures and a lower tax rate enabled AT&T to surpass Wall Street earnings forecasts. The company's focus on high-growth data and wireless services has shown promise, with its wireless division boasting a 41% revenue increase. AT&T's attempt to acquire MediaOne, valued at $110 billion, is on track to complete in the new year, with the company also planning joint ventures with Time Warner and other cable companies.

Key Takeaways:

  • AT&T's traditional consumer voice business saw revenue fall 4.7% to $5.6 billion in the third quarter, due to the price war sparked by MCI WorldCom.
  • The company's business services division reported a 5% revenue increase, to nearly $6 billion.
  • AT&T's wireless division experienced a 41% revenue boost, excluding the impact of acquisitions, thanks to the success of its nationwide fixed-price service.
  • The company's efforts to cut costs and a lower tax rate enabled it to post earnings exceeding Wall Street forecasts.
  • AT&T's attempt to acquire MediaOne, valued at $110 billion, is on track to complete in the new year, pending a shareholder vote.
  • The company is planning joint ventures with Time Warner and other cable companies to sell its telephone services over their cable television systems.

Statistics:

  • Revenue from traditional consumer voice business fell 4.7% to $5.6 billion.
  • Business services division revenue increased 5% to nearly $6 billion.
  • Wireless division revenue rose 41% excluding acquisitions.
  • Total revenues grew 5.6% to $16.3 billion.
  • Earnings rose 22% before interest, taxes, depreciation, and amortization, a measure used in the cable industry.
  • Reported earnings fell 18% to $1.6 billion.
  • Earnings per share declined to 51 cents.

Sources:

  • "The war of attrition in the consumer long-distance telecommunications business has slowed efforts by Michael Armstrong, chairman of AT&T, to speed up the company's growth rate." - The Financial Times Limited, 1999.