The telecommunications sector in the United States of America is vast due to the large population. Today, almost everyone uses a mobile phone, something that justifies the huge markets available to Telcos.
One big player known for spearheading change in telecommunications is AT&T. This piece will break down the Strengths, Weaknesses, Opportunities, and Threats of this company and help you understand its correct position. Read on;
Overview of AT&T
American Telephone and Telegraph is a public company incorporated in 1983 that provides communication and digital entertainment services in the United States, Mexico, and Latin America. Its headquarters are in Dallas, Texas.
AT&T’s mission is “to create the best entertainment and communications experiences in the world.” The vision is ‘to design and create in the decade the new global network, processes and service platforms that maximize automation, allowing for a reallocation of human resources to more complex and productive work.”
Its unique selling point is that it is one of the oldest and largest service providers of mobile and fixed-line telephony in the United States and is a pioneer for offering diversified services in the telecoms industry.
As of 2021, AT&T is worth over $266 billion and has approximately 182.56 million wireless subscribers. It ranks first as the top telecommunications company in the US, with average revenue of 171.76 billion dollars, followed by Verizon and T-Mobile. It also ranks first in the world in terms of revenue and number of customers served.
AT&T is undoubtedly a force to reckon with, but such giants are never perfect. The SWOT analysis below will uncover the favorable and non-favorable issues this company faces.
Strengths of AT&T
As the leading company in the telecommunications industry, AT&T has a couple of strengths that help it thrive in the market. These do not only help it protect market share, but also venture into new markets and diversify to grow its customer base and revenue.
AT&T is the largest telecommunications company globally, which stamps its authority in this space. This advantage allows it to venture into new areas and take measures to cement its position.
In 2015, it spent over $50 billion to acquire DIRECTV, making it the largest TV subscription provider. It ranks 11 in fortune 500 companies and 14th company with the highest brand value.
This superstar status allows AT&T to take on risky ventures and buy companies that help expand its reach or diversify the products and services available to customers.
Its four key business segments are communications, WarnerMedia, Latin America, and Xandr. The communications segment accounts for over 70% of the company’s total revenue, which can still be broken into smaller segments.
One key feature of all the top telecommunications companies in the world is having good infrastructure. It costs a lot of resources to set up telecoms’ infrastructure, such as base stations and wireless radios, let alone maintaining them to ensure uptime. AT&T is one of the oldest telecoms companies, and it has widely invested in infrastructure that gives it strong wireless capabilities.
It covers all major metropolitan areas and caters to up to 300 million people with its LTE technology. It also offers 4G coverage with other technologies, and all these combined enhance its network capabilities and provide superior mobile broadband speeds.
A strong core network allows AT&T to expand coverage and roll out new services, such as 5G, across the population. This is a significant advantage that took many years to get but sets it ahead of the competition who might not boast the same capabilities.
AT&T is strong on data offerings and continues to lead the way as the world moves towards internet-based technologies. Its LTE coverage was one of the strongest in the United States, and it was not left behind when it came to the 5G rollout, despite lagging T-Mobile and Verizon.
The company plans to expand its high-speed broadband and video offerings while enhancing its IP-based services to improve customer experience.
Great Marketing Strategy
AT&T is known for a creative marketing mix that helps communicate its products and services to customers effectively. It uses demographic and psychographic segmentation strategies to understand the granular customer needs and positions its solutions to best address them.
This is backed by its widely differentiated products and services portfolio designed to cater to these customer needs.
AT&T understands that the key to its success is in the people working for it. It has a large workforce of about 230,000 and invests in continuous improvement for all these staff members.
It runs many training and upskilling programs both internally and externally to train and develop these employees. The net result of this is a workforce with the right skills to sustain the company and hungry to learn more as the technologies keep on changing.
AT&T has a growth strategy that involves meticulous partnerships and mergers that let it venture into new spaces. One notable one is the acquisition of DIRECTTV, which gave it a lot of traction in the pay-TV space.
It also acquired Warner Media which supports its video ecosystem across mobile, pay-TV, and online. All these M&As can be credited to AT&T’s solid financial stance and its vision to grow into more niches in the technology space.
Weak Demand Forecasting
Demand forecasting is vital for any company offering services to customers, as it helps them scale up or down resources to meet changes in demand and reduce downtime. AT&T is not very good at demand forecasting, leading to a higher rate of missed opportunities than the competition.
This way, they end up keeping a higher inventory, both in-house and in-channel. Higher day inventory leads to a lot of wastage since the company has to invest many more resources that could have been reinvested elsewhere. This can take a toll on AT&T’s long-term growth plans.
AT&T’s large size and complex structure can be a weakness if you look at it from a flexibility point of view. This is in light of the volatile telecoms and technological space, which keeps on changing due to the disruptions taking place across the world.
It is difficult for such a large company to adjust to these nibble changes compared to some of these smaller players. These companies have smaller development cycles and can get a product to market faster compared to AT&T.
In addition, they can change their discount programs and data offerings without upsetting a more extensive customer base. Lastly, they do not have an extensive distribution channel, making it easier to either recall or change what is available to customers.
In recent years, AT&T has been taking up more debt to finance its acquisitions and other incentives, such as the 5G rollout. In August 2020, AT&T’s long-term debt was at $153.39. While this has been growing, its EBITDA has been stagnant, showing how the difference is becoming a concern.
This is also analyzed with respect to its dividend payout, which is among the highest industry. With other financial obligations, this increased debt can easily strain AT&T’s balance sheet and can threaten to strap it off some of the cash that has helped it remain an industry leader over time.
High Attrition Rate
When compared to other companies, the AT&T workforce has experienced a higher attrition rate. This can be justified by the larger workforce it has, but it can also point out its issue. A huge workforce is hard to keep happy, as many people can get away with just giving the bare minimum.
As a result, it is hard to keep top performers motivated since they often find themselves pulling the others, and their hard work can be hard to notice. High attrition rates are an issue since the company has to keep on hiring new staff members to replace the ones leaving and invest more resources in training and upskilling them to the required level.
Limited Investment in R&D
Some of the top companies in technology invest a lot in research and development to help them innovate and come up with impressive solutions to their customers’ pain points. While AT&T is spending more than the industry average in R&D, it does not match what its peers are investing.
This is seen in the way companies like Verizon and T-Mobile have leapfrogged it in, rolling out new technologies such as 5G. Aside from spending, AT&T needs to rework its R&D strategy and ensure that it works to help the company spearhead some of the major technological breakthroughs similar to what other companies are doing.
AT&T currently provides its products and services in the American market, which is nearing saturation. There is an opportunity to expand to other regions, especially in markets where the players are not that strong.
AT&T has substantial experience in the telecommunications industry and can give just about any company in the world a run for their money by venturing into different markets.
Cloud Computing and Internet of Things
Today, telecommunications companies cannot survive by offering voice connectivity only. The demand for voice services is diminishing by the day, and such companies need to rebrand and become technological companies. There are multiple opportunities for a giant like AT&T to venture in, for instance, cloud computing and IoT.
They can take advantage of their existing customer base to either bundle these packages to existing ones or ride on their brand loyalty to get a sustainable number of customers for these new services.
Environmentally Friendly Operations
As the globe is moving towards green solutions, AT&T can take advantage of this opportunity to scale up operations in this area and establish its brand as an entirely green company. Giants like Google and Facebook have already made huge inroads by managing their operations to ensure they are entirely environment-friendly.
While the company tries to expand globally, there is an opportunity to take this up as a priority, as it will do the brand well and put it on the right path to establishing dominance.
The number of players in the telecommunications industry in the American market has increased. AT&T faces a tough fight to fend off the competition, and this does not only refer to fellow giants like T-Mobile and Verizon, but smaller ones like Cricket, Sprint, and US Cellular, among others.
These companies are slowly eating into AT&T’s market share thanks to their flexible plans and good offers that cannot be matched. If AT&T does not venture into emerging markets, it faces a huge fight to retain its command due to the currently saturated US market.
The telecommunication giants have engaged in price wars over the years, which continue to threaten AT&T’s dominance. This is driven by increased competition in an almost saturated market, as companies must take drastic measures to drive growth.
They engage in price wars by reducing the cost of their packages to a point where all the other players must adjust their deals to keep up. These wars lead to instability since companies always must change their prices to measure up with the competition, which leads to a reduction in revenues.
With the poor performance of the US economy, which is AT&T’s dominant market, the company has taken a toll on its revenues. This recession has reduced consumer spending power, and it forced the company to scale down operations and even lay off some staff.
Such issues can affect AT&T’s long-term stability and allow the competition to catch up with them.
Frequently Asked Questions
Question: Is AT&T Better than Verizon?
Answer: It all depends on what aspect. Generally, Verizon offers superior 4G coverage, while AT&T can be the preferred 5G option depending on which areas you are in. AT&T charges a lower price for its products and services, including more high-speed data on its unlimited plans.
Question: What is AT&T’s Strategy?
Answer: The recent announcement from the company was that it would focus on being a telco. This is strange considering its acquisitions and inroads into cable TV services.
However, AT&T has proven its credentials in the telco space, and focusing on broadband and mobile services will strengthen its core and give it the perfect foundation to venture into new areas.
Question: Who is the Number One Wireless Carrier in the United States?
Answer: AT&T is the leading wireless carrier with a share of 44.8% of wireless subscriptions as of the first quarter of 2021. The other major players with significant market share are Verizon and T-Mobile.
The USA telecommunications industry is very volatile, and AT&T has huge competitors breathing down its neck. However, it boasts some significant strengths that keep it ahead of the stock, but only just.
Verizon, the primary competitor, leads in some aspects and T-Mobile, and it can reasonably be considered a three-horse race with all the players having significant strengths to their name.
However, this market is enormous, and AT&T has the right composition to retain its position, thanks to the strategic acquisition moves that help it venture into upcoming niches and increase its customer base.
The COVID-19 pandemic from 2019 to 2021 was a massive blip in global economies, but this was not an issue for AT&T alone. What remains to be seen is how this shakeup will define the next phase of this huge market.