ACC3214 Business Life Cycle of AT and T Assessment Answer
|Semester||August 2020||Module Code||ACC3214|
|Module Title||BUSINESS LIFE CYCLE|
|Assignment Title||AT & T|
|Learning Outcomes: Knowledge and Understanding tested in this assignment:|
|List the Outcomes Mapped in Module Guide and Table of Specification|
|Learning Outcomes: Skills and Attributes tested in this assignment:|
|List the Outcomes Mapped in Module Guide and Table of Specification|
|General Coursework Rules|
Provide the description of the assignment and the tasks required.
Part 1: Individual Report (80%)
About AT & T
AT & T, formerly known as SBC Communications Inc. (SBC), was formed as one of several regional holding companies created to hold AT & T Corp.’s (ATTC) local telephone companies. On January 1, 1984, the company was spun-off from ATTC pursuant to an anti-trust consent decree, becoming an independent publicly traded telecommunications services provider. At formation, the company primarily operated in five southwestern states.
Following the formation, the company has expanded its footprint and operations by acquiring various business, most significantly:
- The subsidiaries merged with Pacific Telesis Group in 1997, Southern New England Telecommunicat ions
Corporation in 1998 and Ameritech Corporation in 1999, thereby expanding the company’s wireline operations as the incumbent local exchange carrier (ILEC) into a total of 13 states.
- In 2005, the company merged one of our subsidiaries with ATTC, creating one of the world’s leading telecommunications providers. In connection with the merger, the name of the company was changed from “SBC Communications Inc.” to “AT&T Inc.”
- In 2006, the company merged one of the subsidiaries with BellSouth Corporation (BellSouth) making the company the ILEC in an additional nine states. With the BellSouth acquisition, the company also acquired BellSouth’s 40 percent economic interest in AT&T Mobility LLC (AT&T Mobility), formerly Cingular Wireless LLC, resulting in 100 percent ownership of AT&T Mobility.
- In 2014, the company completed the acquisition of wireless provider Leap Wireless International, Inc. and sold our ILEC operations in Connecticut, which we had previously acquired in 1998.
- In January and April 2015, the company acquired wireless properties in Mexico, and acquired DIRECTV, a leading provider of digital television entertainment services in both the United States and Latin America.
- In June 2018, the company acquired Time Warner Inc. (Time Warner), a leader in media and entertainme nt that operates the Turner, Home Box Office (HBO) and Warner Bros. business units. The company also acquired Otter Media Holdings August 2018 and advertising platform AppNexus in August 2018.
In late 2019, the company announced the sale of wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands; the sale is expected to close in mid- 2020
AT & T’s mission
Inspire human progress through the power of communication & entertainment.
AT & T’s values
Live true. Do the right thing, no compromise.
Think big. Innovate and get there first.
Pursue excellence. In everything, every time.
Inspire imagination. Give people what they don’t expect. Be there. When customers and colleagues need you most. Stand for equality. Speak with your actions
Embrace freedom. Press, speech, beliefs.
Make a difference. Impact your world.
AT & T Operating Segments
AT & T Communications
AT&T Communications provides more than 100 million U.S. consumers with entertainment and communications experiences across TV, mobile and broadband services. It has the nation’s best network and, for the 5th quarter in a row, fastest wireless network.3 It also serves nearly 3 million business customers
— including nearly all of the Fortune 1000 — with high-speed, highly secure connectivity and smart solutio ns. 2019 revenues of $142.4 billion.
The Mobility segment provides nationwide wireless service to consumer, business and wholesale subscribers located in the United States and in U.S. territories. The company’s wireless network powers voice and data services, including high-speed internet and video entertainment.
The Entertainment Group provides video, including over-the-top (OTT) services, broadband and voice communications services primarily to residential customers.
The Business Wireline segment provides advanced IP-based services, as well as traditional voice and data services to business customers.
WarnerMedia is a leading media and entertainment company that creates and distributes premium and popular content from a diverse array of talented storytellers and journalists to global audiences. WarnerMedia’s brands operate one of the world’s largest TV and film studios and own a deep library of entertainment. They also manage popular digital sites such as Bleacher Report and a growing family of streaming services includ ing HBO NOW, Boomerang and DC Universe. WarnerMedia also offers a strong portfolio of advertising solutions. On May 27, 2020, WarnerMedia plans to launch HBO Max, its new streaming platform. 2019 revenues of $33.5 billion.
Turner delivers some of the most valuable brands in the world across entertainment, sports, news and kids programming. It boasts more than 175 international networks, including the #1-rated pay-TV network portfolio in Latin America. Turner also sells advertising on its networks and digital properties.
Home Box Office
Home Box Office has world-class premium video and licenses its programming in more than 150 countries. It offers premium pay television and OTT services domestically and premium pay, basic-tier television, and OTT services internationally. HBO is known for its ground-breaking original series, popular late-night programs, compelling sports shows, award-winning documentaries, as well as Hollywood blockbusters.
Warner Bros. is a leader in global entertainment and is the world’s leading producer of film and televis ion programming. Its vast library includes more than 100,000 hours of programming and is home to some of the most beloved franchises in entertainment, including DC Entertainment, Harry Potter and Lord of the Rings. It also produces and distributes video games.
AT&T Latin America
AT&T’s Latin America segment offers mobile services to consumers and businesses in Mexico and digita l entertainment services throughout South America and the Caribbean. 2019 revenues of $7.0 billion.
Vrio provides video services to customers using satellite technology in Latin America and the Caribbean. It is a leader in providing digital entertainment services in those regions through its DIRECTV and SKY Brasil brands. The company also has a minority stake in Sky Mexico.
The company’s Mexico business unit provides wireless service and equipment to customers in Mexico. AT&T is the fastest-growing wireless provider in Mexico and is transforming telecommunications across the country and helping to accelerate the closing of the digital divide.
Xandr is AT&T’s advertising company and a leader in addressable TV, creating a better solution for advertisers and media companies. Xandr provides marketers with advanced advertising solutions using valuable customer insights from AT&T’s TV, mobile and broadband services and its extensive ad inventory. Xandr Invest and Xandr Monetize, its strategic platforms built on more than a decade of AppNexus’ innovation, optimize media spend across screens for buyers and sellers alike. Community, powered by Xandr, is a curated marketplace of premium publishers, providing access to unique consumer insights in a brand-safe environment. 2019 revenues of $2.0 billion.
Exhibit 1: Operating revenues and operating contribution of the reportable segments
Exhibit 2: Results of operations
Exhibit 3: AT & T Historical Financial Performance AT & T Selected Financial and Operating Data Dollars in millions except per share amounts
Exhibit 4B: Verizon Stock Price Performance
The telecommunications industry
As major networks and studios continue to launch their own direct-to-consumer streaming services in 2020, competitors will likely scramble to offer content libraries broad enough to both attract and retain customers. According to Kevin Westcott, vice chairman and US telecommunications, media, & entertainment leader, Deloitte Consulting LLP, this creates opportunities for M&E firms to “reaggregate” their content libraries with a wide array of offerings—from video, music, and gaming services to ad supported (non-subscript ion) content. Telecommunications providers, on the other hand, face the opportunities and challenges of building the infrastructure for 5G—and helping shape (and manage) customers’ expectations regarding its possibilit ies.
The portfolio of businesses that AT & T has built, both organically and inorganically, has provided an enviable competitive advantage in 4 essential areas:
- Advanced high-capacity networks built on a foundation of high-quality spectrum.
- A large base of direct consumer relationships across mobile, pay TV and broadband.
- Scaled capabilities to produce premium TV, theatrical and gaming content, coupled with one of the deepest and richest content libraries anywhere.
- Advertising technology and inventory that enable the company to make the most of the insights collected from the customer relationships.
“We remain committed to investing in growth opportunities for the business now and in the future, returning value to shareholders through dividends and paying down debt.”
Chairman and Chief Executive Officer
Key 2020 Initiatives
Elements of a Modern Media Company
It all starts with advanced high-capacity networks. It was clear early on that the mobile internet revolution and a world of streaming video would require much more capacity than people were anticipating. So, AT & T began investing for future demand.
These investments included well more than $30 billion over the past 7 years in premium spectrum licenses and the acquisition of Leap Wireless, which gave the company additional spectrum.
The company also were selected by the U.S. government to build and manage the FirstNet first responder network. This brought with it another layer of premium spectrum capacity. Over the past two years, the company has put this capacity into service with dramatic performance improvements. As a result, AT&T has the best and fastest wireless network in the United States.3
By first-quarter 2020, we had launched 5G to more than 120 million people, and we expect to have nationw ide coverage in summer 2020.
The company has also invested in high-capacity networks in Mexico. In 4 years, the company has built a high- speed, nationwide mobile network and have more than doubled the customer base.
Since 2015, the company has also undertaken the most aggressive fiber deployment program in the U.S. — with more than 22 million locations passed.5
Over the next 3 years, this strong spectrum position will allow lower capital intensity and increased revenues, and that bodes well for growing operating margins.
Direct consumer relationships are the second essential element in this strategy and the company has about 170 million of them across mobile, pay TV and broadband. That number climbs to more than 370 million whe n you include viewers on digital properties, including CNN.com and Bleacher Report.6
As the company prepares to launch HBO Max, these direct consumer relationships are an asset that any media company would love to have.
Gaining scale in linear pay TV was the core rationale behind the DIRECTV acquisition. The company realized the satellite business was mature. The company anticipated subscriber losses. But the content cost savings quickly turned the U-verse pay TV business from a loss to a profit. And since the company bought DIRECTV, it has generated healthy cash flows of $4 billion or more per year and a total of $22 billion by the end of 2019.
Third, the company believes that the value of premium content will only increase over time as consumer demand continues to grow and new video engagement formats made possible by 5G emerge. And investors have been able to see the value increase with some of the multiples paid for media companies after the Time Warner deal.
The old business models in which premium content is created for distribution exclusively through such traditional channels as theaters, cable and satellite companies just are not sustainable. Technology is driving
these business models together, and the company believes those companies that can integrate scaled content creation businesses with scaled distribution will hold a critical advantage in the years to come.
Last, AT&T’s vast distribution network and subscriber base bring valuable viewer and customer insights. That provides a unique opportunity to create an ad-tech platform and pair it with the company’s large advertising inventories. In 2019, the company launched Community, a premium video marketplace for buyers and sellers. Building upon these 4 critical capabilities positions the company in 2020 as the leader in network performance and capacity. The company also has one of the premier entertainment companies in the world, with scaled production capabilities for both TV and theatrical content and vast, unmatched intellectual property libraries. And on May 27, 2020, the company brought all these critical elements together in a whole new way with the launch of HBO Max. HBO Max will allow the company to bring together WarnerMedia’s premium content, AT&T’s products and services, and Xandr’s robust insights to give our customers a premium streaming experience. Xandr’s data insights will help keep advertising relevant for viewers and effective for advertisers.
5 Includes more than 8 million U.S. business customer locations on or within 1,000 feet of our fiber. 6 Represents cumulative 170 million video-capable consumer relationships across the following: postpaid and prepaid wireless; TV and video offerings, including HBO Digital (HBO NOW® and over-the-top) and AT&T TV NOW; Mexico wireless; and U.S. consumer broadband, as well as more than 200 million unique visitors to digital properties, including CNN Digital, Otter Media and Bleacher Report.
AT&T is committed to conducting business with the highest ethical standards and integrity, with an emphasis on corporate responsibility and sustainability. The company’s suppliers are held accountable to the same high ethical, environmental, social and governance standards.
Suppliers are a key part of AT & T’s business and therefore must be part of the approach to sustainability and diversity. The company has suppliers around the world (in non-embargoed countries) representing all types of trades, engaged across all our operating units. AT&T Communications works with more than 20,000 suppliers around the world. The reach of the supply chain allows AT&T the opportunity to streamline operations, reduce long-term costs and limit overall environment impact.
The company continues proactive work with the suppliers to advance sustainable business practices throughout our supply chain, focusing on energy use, climate impact, human rights, water use, waste, and natural resource use. AT&T is committed to promoting healthy, safe, and inclusive working conditio ns throughout our supply chain.
AT&T also works to increase the participation of minority-, woman-, veteran-, LGBTQ+- and disabilit y- owned business enterprises in the supply chain. The company also encourages subcontracting opportunities for these businesses by requiring supplier diversity participation from their prime suppliers.
The supply chain of AT&T Communications and AT&T Latin America, 2 of our operating companies, is managed by the Global Connections and Supply Chain (GCSC) organization, representing the largest and most complex portion of our supply chain. Because of the scale of this work, this issue brief reflects efforts of GCSC, unless otherwise noted. In 2019, GCSC centralized the management of high-risk suppliers representing certain high-risk factors and optimized reverse logistics strategy and operations.
Managing the Supply Chain
Top managerial responsibility for supply chain management lies with the Executive Vice President of GCSC, who also sits on the Corporate Social Responsibility Governance Council ("Council"). The Council is led by our Chief Sustainability Officer, with oversight from the Public Policy and Corporate Reputation Committee of the AT&T Board of Directors.
The company’s supply chain management strategy includes incorporating Citizenship and Sustainability as well as Supplier Diversity clauses into agreements and RFPs, training sourcing managers on the principles of sustainability and diversity and providing updates to sourcing managers on supplier sustainability and diversity performance. The company strives to ensure conformance with the AT&T Principles of Conduct for Suppliers ("Supplier Principles") using the following approaches:
- The Supplier Principles are posted on the AT&T Supplier Portal and are publicly accessible to all AT&T suppliers as well as any potential future suppliers. The company’s Supplier Principles and manage ment systems are also applicable to non-tier 1 suppliers.
- The company’s general agreements and purchase order terms includes Citizenship and Sustainability as well as Diversity clauses.
- The company also conducts Strategic Supplier Sustainability Assessments and corporate social
responsibility (CSR) audits and assessments. The company’s CSR audit and assessment program are conducted through their membership in the Joint Audit Cooperation (JAC) and applies to tier 1, 2 and 3 suppliers.
- The company also started implementing a Preferred Supplier Program in 2019 to recognize suppliers that demonstrate a commitment to all aspects of corporate social responsibility in the areas of diversity and sustainability.
Continuing growth in and the converging nature of wireless, video, and broadband services will require the company to deploy significant amounts of capital and require ongoing access to spectrum to provide attractive services to customers.
Wireless, video, and broadband services are undergoing rapid and significant technological changes and a dramatic increase in usage the demand for faster and seamless usage of video and data across mobile and fixed devices.
The company must continually invest in our networks to improve our wireless, video, and broadband services to meet this increasing demand and remain competitive. Improvements in these services depend on many factors, including continued access to and deployment of adequate spectrum and the capital needed to expand our wireline network to support transport of these services. To stem broadband subscriber losses to cable competitors in our non-fiber wireline areas, we have been expanding our all-fiber wireline network. We must maintain and expand our network capacity and coverage for transport of video, data and voice between cell and fixed landline sites. To this end, we have participated in spectrum auctions and continue to deploy software and other technology advancements to efficiently invest in our network.
Network service enhancements and product launches may not occur as scheduled or at the cost expected due to many factors, including delays in determining equipment and wireless handset operating standards, supplier delays, software issues, increases in network and handset component costs, regulatory permitting delays for tower sites or enhancements, or labor-related delays. Deployment of new technology also may adversely affect the performance of the network for existing services. If the company cannot acquire needed spectrum or deploy the services customers desire on a timely basis with acceptable quality and at adequate cost, then the company’s ability to attract and retain customers, and, therefore, maintain and improve the operating margins, could be materially adversely affected.
Increasing competition for wireless customers could materially adversely affect our operating results. The company has multiple wireless competitors in each of their service areas and compete for customers based principally on service/device offerings, price, network quality, coverage area and customer service. In addition, the company are facing growing competition from providers offering services using advanced wireless technologies and IP-based networks. The company anticipates market saturation to continue to cause the wireless industry’s customer growth rate to moderate in comparison with historical growth rates, leading to increased competition for customers. The company also expect that their customers’ growing demand for highspeed video and data services will place constraints on our network capacity. These competition and capacity constraints will continue to put pressure on pricing and margins as companies compete for potential customers. The company’s ability to respond will depend, among other things, on continued improvement in network quality and customer service as well as effective marketing of attractive products and services. These efforts will involvesignificantexpenses and require strategic managementdecisionson, and timely implementation of, equipment choices, network deployment and service offerings.
Ongoing changes in the television industry and consumer viewing patterns could materially adversely affect our operating results.
The company’s video subsidiaries derive substantial revenues and profits from cable networks and premium pay television services and the production and licensing of television programming to broadcast and cable networks and premium pay television services. The U.S. television industry is continuing to evolve rapidly, with developments in technology leading to new methods for the distribution of video content and changes in when, where and how audiences consume video content. These changes have led to (1) new, internet-based OTT competitors, which are increasing in number and some of which have significant and growing subscriber/user bases, and (2) reduced viewers of traditional advertising-supported television resulting from increased video consumption through SVOD services, time-shifted viewing of television programming and the use of DVRs to skip advertisements. The number of subscribers to traditional linear programming in the