AT&T’s iPhone Addiction and Potential Withdrawal
Written by Kieng Iv
Date: Monday, April 11, 2011
Randall Stephenson, CEO of AT&T, sat in his office looking at AT&T’s 2009 financial
statements. He said to himself, “Record sales, record number of customers, industry leader,
record net income, and record operating cash flow…why am I so worried?” Then he looked at
the only other file open on his laptop – ‘Apple Exclusivity Contract’.
In 2006, AT&T1(Cingular back then) had spent 18 months having secret meetings with Steve
Jobs, Apple’s CEO, or better known as their ‘savior’. AT&T back then made many
unprecedented agreements with Apple, including losing control of the design, cost and features
offered on the iPhone. Essentially, Apple owned the user experience, and for the first time, the
carrier was the pawn in the relationship.
The Apple partnership has been a key driver in the growth of AT&T’s over the last five years.
With voice wireless plans facing extreme price wars and margins being slashed right and left, the
iPhone was an opportunity to grow the lucrative wireless data services market. In 2009,
smartphones and data were “key factors driving wireless revenue growth of nearly 9 percent”.2
The iPhone has become so important that in the last quarter of 2008, the iPhone made up 36% of
new customers to AT&T, or $60 Million a month in additional revenue.3
With just one more year left on the contract and rumours that Apple will expand to rival
telecommunication giant Verizon, Randall thought to himself, “Something must be done or else
our long-term growth will be in jeopardy”. At that moment his iPhone reminded him that he had
a meeting with a consulting firm to discuss the strategic direction of AT&T.
The following comes from minutes of the meeting:
Salim Ponniah: Hi Mr Stephenson, my name is Salim, I am here to talk about the scope of my
firm’s consulting engagement.
Randall Stephenson: Thank you Salim for coming. As you likely know, 2009 was another great
year for AT&T but we are concerned about maintaining our market leadership and more
importantly, our growth.
Salim Ponniah: Yes, the telecommunication has become very fierce with new entrants and
constant mergers and acquisitions have made other competitors stronger.
Randall Stephenson: That is why I need you to understand AT&T’s business through analyzing
our strategy. Then assess whether or not we are creating and capturing value and review the
different opportunities my internal team has developed. Provide me with recommendations on
what AT&T should do. Also identify any barriers or resources we will need to overcome or
1
Vogelstein, Fred. "The Untold Story: How the IPhone Blew Up the Wireless Industry." Wired.com. 01
Sept. 2008. Web. 10 Mar. 2011. <http://www.wired.com/gadgets/wireless/magazine/16-02/ff_iphone>.
2 "AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
3 Malik, Om. "Why AT&T Is Desperately Addicted to the IPhone: Tech News and Analysis «."GigaOM –
Tech News, Analysis and Trends. 22 Apr. 2009. Web. 10 Mar. 2011. <http://gigaom.com/2009/04/22/whyatt-is-desperately-addicted-to-the-iphone/>.
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acquire to make these recommendations successful. List any assumptions you need to make
when performing your analysis.
Salim Ponniah: Okay, we will provide a memo and will prepare a presentation for you by next
week.
Verizon
Verizon Communications Inc. (Verizon) is a broadband and telecommunications company. Its
origins can be found from the case, United States v. AT&T, where the company that is now
known as Verizon was one of the seven AT&T spinoffs, known as “Baby Bells”. Verizon has
grown organically and through mergers and acquisitions to become one of the industry leaders in
the telecommunications market.
Verizon mainly competes in the wireless, wireline, internet, and telephone industries. Within the
wireless industry, Verizon is the market leader with 32% market share.4 Also Verizon is known
for its call quality with its slogan, “Can you still hear me now?”, repeatedly said in its
commercials. Verizon is planning to launch one of the first 4G Networks in 2010 which is set to
take the wireless market to new levels. At its peak, 4G ranges from 9 to 20 times faster than 3G
network peaks.5
One of Verizon’s competitive advantages is the long, unsolved rumour that Verizon’s network is
the most reliable and fast.6 This was further supported by studies performed by Wired.com and
PCWorld.com. In the study performed by PCWorld, it was found that Verizon was the fastest out
of the three largest 3G networks: Verizon, AT&T, and Sprint. It clocked in a speed 19% and
50% faster than Sprint and AT&T, respectfully.7
AT&T
History and Current Position
The original American Telephone & Telegraph Company (AT&T Corp.) started in 1886. In the
early and mid 20th century, AT&T was regarded as a national monopoly, and was closely
watched by anti-trust government regulators. In 1984, government regulators forced AT&T to
divest itself into seven smaller companies.
In 2005, SBC Communications purchased AT&T Corp. for $16 billion and the merged
organizations became AT&T Inc. and maintained AT&T’s branding. Prior to their merger, SBC
and AT&T grew individually through acquisitions and mergers, such as the purchase of Comcast
4
US Wireless Market Q4 2009 Update - Mar 2010 - Chetan Sharma Consulting
"3G vs. 4G Wireless - What Is the Difference | Fun Tech Talk." www.funtechtalk.com. Web. 10 Mar.
2011. <http://www.funtechtalk.com/3g-vs-4g-wireless-what-is-the-difference/>.
6 Chen, Brian X. "Verizon Leads, AT&T Runs Last in Wired.com’s 3G Speed Test | Gadget Lab |
Wired.com." Wired.com. 10 July 2009. Web. 10 Mar. 2011. <http://www.wired.com/gadgetlab/2009/07/3gspeed-test/>.
7 Sullivan, Mark. "A Day in the Life of 3G - PCWorld." PCWorld. June-July 2009. Web. 10 Mar. 2011.
<http://www.pcworld.com/article/167391/a_day_in_the_life_of_3g.html>.
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Cellular for $1.7 billion. Even after post merger, AT&T continued to purchase Cellular One,
Centennial Communications Corp and many other companies.
As of 2009, AT&T competes in the wireline, wireless, data and online advertising. Historically,
the wireline market has been AT&T’s bread and butter. However, the focus now to proceed
forward will be competing in the wireless and the high speed internet. AT&T is also focusing on
strengthening communities; investing in people; leading with integrity; minimizing our
environmental impact; connecting people and business; and leading innovation and technology.8
In addition, AT&T aims to become the market leader in every market it enters.
Majority of AT&T revenues are derived from wireless services. AT&T competes almost
exclusively within the United States. Following wireless, voice and data services are the next
largest components. However, voice services have been on a downward decline since the market
has been replaced largely with cell phones and voice over IP services. The growth rates for the
wireless, wireline, online-advertising and data services industries are 18.5%9, -0.3%10, 12%11 and
5%12 respectively.
Wireless Division and Market
AT&T has 30% of the market share of carrier subscribers behind only Verizon, its biggest
competitor in the wireless market. But unlike Verizon, AT&T owns 100% of its wireless
division. Within the smartphone market, it is the leader by adding twice as many smartphone
users in 2009 when compared to its next competitor.13 In the last three years, only data and
wireless divisions have been able to achieve any significant growth in revenue. The number of
wireless customers has increased 10.5% and 9.9% in 2009 and 2008 respectfully. As well, churn,
which is defined as the number of customers who leave AT&T for a direct competitor, has been
on a downward trend (please see appendix E). This is a trend that AT&T hopes to continue.
AT&T delivers its wireless services through its 3G network. However, its network is much
slower than Verizon according to test performed by Wired.com and PCworld.com. Its
availability was listed as long 68%, which is far lower than its main competitors AT&T and
Sprint.14 However, AT&T is planning to upgrade its 3G network to High Speed Packet Access
(HSPA) 7.2 technology by 2011.15
8
"AT&T Citizenship and Sustainability Report." AT&T. Web. 10 Mar. 2011.
<http://www.att.com/gen/corporate-citizenship?pid=12316>.
9 http://www.businesswire.com/news/home/20110127006929/en/CORRECTING-REPLACING-MobilePhone-Market-Grows-17.9
10 http://www.the-infoshop.com/press/aa128477.shtml
11 http://www.businessweek.com/news/2010-09-13/asia-pacific-to-pass-north-america-in-ad-marketsize.html
12 http://www.chetansharma.com/US%20Wireless%20Market%20Q1%202009%20Update%20%20May%202009%20-%20Chetan%20Sharma%20Consulting.pdf
13 "AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
14 Sullivan, Mark. "A Day in the Life of 3G - PCWorld." Reviews and News on Tech Products, Software
and Downloads - PCWorld. Web. 10 Mar. 2011.
<http://www.pcworld.com/article/167391/a_day_in_the_life_of_3g.html>.
15 "AT&T Announces 2009 HSPA 7.2 Network Upgrade Plans." BGR. Web. 10 Mar. 2011.
<http://www.bgr.com/2009/09/09/att-announces-2009-hspa-7-2-network-upgrade-plans/>.
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Other Divisions
U-verse is a product that offers Internet Protocol Television (IPTV) which was launched three
years ago. It was awarded “Highest in Residential Television Service Satisfaction in the South
and West Regions Two Years in a Row” by J.D. Power and Associates. One of the major
features of AT&T is the ability to bundle products. In fact more than 90 percent of U-verse TV
customers bundle high speed Internet, and nearly 70 percent add IP voice which provides high
level of convenience for consumers since they deal with less service providers and save money
through bundling. It is expected that IPTV subscriptions will exceed 131 million globally by
2015, a cumulative annual growth rate of 23%.16
AT&T is also helping customers work more efficiently and effectively. AT&T’s goal is to
heighten network security and protect the network from unauthorized access; the same
technology used to protect AT&T’s own networks. “AT&T has an outstanding reputation in the
security services business.” AT&T’s network solution is a one stop shop for end to end
security.17
Marketing is a vital component of AT&T’s strategy. It has corporate marketing partnerships with
USA Swimming18, and also sponsors the stadium where the National Basketball Association
team, The San Antonio Spurs, play in. As well, it has been able to maintain a strong social media
brand through the strong use of its Facebook and Twitter pages.19
Recently, the telecommunications industry has seen fierce mergers and acquisitions by big
players within the market, especially AT&T and Verizon. A major factor that determines a
company’s ability to acquire others is its leverage; the proportion of its assets that are financed
by debt. AT&T currently has a debt to equity ratio 1.63 which is favourable when compared to
Verizon which has a debt to equity ratio of 1.69. But both companies are mainly financed
through their debt as opposed to their equity. AT&T’s discount rate is approximately 6.5% as of
the end of 2009.
Please see appendix G for AT&T’s financial information.
Opportunities
Option 1: Acquisition of DISH Network
DISH Network formed in 1995 and is a pay-TV provider within the US. As of December 31st,
2009 DISH Network has 14.1 Million subscribers and is publicly traded on the NASDAQ. “Our
16
"IPTV Subscriptions To Reach 132 Million by 2015 | Satellite Markets." Satellite Markets |
SatelliteMarkets.com - Industry Trends, News Analysis, Market Intelligence and Opportunities. Web. 10
Mar. 2011. <http://www.satellitemarkets.com/node/826>.
17 "Managed Network Security Services| AT&T Government Markets| AT&T." AT&T | Cell Phones, Uverse, Digital TV, DSL Internet, and Phone Service. Web. 10 Mar. 2011.
<http://www.corp.att.com/gov/solution/network_services/recovery_security/mannwsecserv.html>.
18 "USA Swimming - Marketing Partners." USA Swimming - Home. Web. 10 Mar. 2011.
<http://www.usaswimming.org/DesktopDefault.aspx?TabId=1574>.
19 "Brand Image - AT&T: Customer Service 2.0 | Social Brand Value." Measuring Social Brand Value.
Web. 10 Apr. 2011. <http://www.social-brand-value.com/2010/07/02/brand-image-att-customer-service-20/>.
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business strategy is to be the best provider of video services in the United States by providing
high-quality products, outstanding customer service, and great value.”20
Value Proposition
DISH Network focuses on three main aspects when delivering its value proposition:
 Quality products
 Customer service
 Price
High-Quality Products:
“We offer a wide selection of local and national programming, featuring more national and local
HD channels than most pay-TV providers. We have been a technology leader in our industry,
introducing award-winning DVRs, dual tuner receivers, 1080p video on demand, and external
hard drives. To maintain and enhance our competitiveness over the long term, we plan to
promote a suite of integrated products designed to maximize the convenience and ease of
watching TV anytime and anywhere, which we refer to as, “TV Everywhere.””21
Outstanding Customer Service:
“We strive to provide outstanding customer service by improving the quality of the initial
installation of subscriber equipment, improving the reliability of our equipment, better educating
our customers about our products and services, and resolving customer problems promptly and
effectively when they arise.” 22
Great Value:
“We have historically been viewed as the low-cost provider in the pay-TV industry because we
offer the lowest everyday prices available to consumers after introductory promotions expire.” 23
Programming
“More than 280 basic video channels, 60 Sirius Satellite Radio music channels, 30 premium
movie channels, 35 regional and specialty sports channels, 2,500 local channels,220 Latino and
international channels, and 50 channels of pay-per-view content” 24
Core Activities
Content Delivery
“We also use eight regional digital broadcast operations centers owned and operated by EchoStar
that allow us to maximize the use of the spot beam capabilities of certain owned and leased
20
"Annual Reports." DISH Network - Investor Relations - 1.888.825.2557. Web. 10 Mar. 2011.
<http://dish.client.shareholder.com/annuals.cfm>.
21 "AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
22 "AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
23 "AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
24 "AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
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satellites. Programming content is delivered to these centers by fiber or satellite and processed,
compressed, encrypted and then uplinked to satellites for delivery to consumers” 25
Market:
Please see Appendix F for satellite industry growth numbers
From 2004 to 2009, the average annual growth rate of the satellite market was11.7%26 and
revenue figures have exceeded 160 billion. In 2009, the industry grew at 10.3% and is expected
to grow approximately 9.7% in 2010.
Acquisition
In 2007, it was rumoured that AT&T was interested in acquiring Echostar, DISH Network’s
parent company at the time, for $55 per share which would have represented a premium of
nearly 25% over the market price. The total purchase price was $13 Billion.27 However, the
purchase was declined as Echostar was waiting for a purchase price of $65 per share instead.
Later that year, AT&T’s CFO Richard Lindner last year dismissed the rumors stating that
“additional acquisitions weren't necessary, but direct ownership of a satellite operator could help
them fill in the U-Verse gaps.”28
The acquisition of DISH Network would improve AT&T’s video efforts since its Project
Lightspeed has been a disappointment and the acquisition would make AT&T’s offerings more
competitive against competing cable companies.29
As of December 31st 2009, DISH Network’s shares are trading at $20.77 and there are 443.31M
outstanding shares.30
Option 2: Exclusive Contract for Tablets
It is rumoured that Apple is planning to release its own tablet in 2010, rumoured to be called the
iSlate or iTablet. Apple actually released its first tablet in 1993 and it was called
Newton MessagePad 100. Even though it is argued that the device was advanced and had few
technical problems, it failed to gain mainstream success because of its inability to attract
25
"AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
26 "VITAL STATISTICS | Satellite Markets." Satellite Markets | SatelliteMarkets.com - Industry Trends,
News Analysis, Market Intelligence and Opportunities. Web. 20 Mar. 2011.
<http://www.satellitemarkets.com/node/9>.
27 "AT&T: Doesn't Need Echostar - CFO Says Company Has Everything It Needs to Battle Cable |
DSLReports.com, ISP Information." DSLReports Home : Broadband ISP Reviews News Tools and
Forums. Web. 10 Mar. 2011. <http://www.dslreports.com/shownews/71156>.
28 "AT&T: Doesn't Need Echostar - CFO Says Company Has Everything It Needs to Battle Cable |
DSLReports.com, ISP Information." DSLReports Home : Broadband ISP Reviews News Tools and
Forums. Web. 10 Mar. 2011. <http://www.dslreports.com/shownews/71156>.
29 Moritz, Scott. "AT&T-EchoStar Talks Heat Up - TheStreet." Stock Market Today - Financial News,
Quotes and Analysis - TheStreet. 27 Sept. 2007. Web. 10 Mar. 2011. <http://www.thestreet.com/s/attechostar-talks-heat-up/newsanalysis/techtelecom/10381691.html?puc=_googlen?cm_ven=GOOGLEN>.
30 Google Finance. 12 Mar. 2011.
http://www.google.ca/finance?hl=en&xhr=t&q=dish+network&cp=4&um=1&ie=UTF-8&sa=N&tab=we
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customers. Due to this inability, it was decommissioned from production in 1997 by Steve Jobs
upon his return to Apple.31
The Apple tablet has been talked about by industry analyst for years. The following features and
benefits have been speculated for the Apple Tablet:
Screen Technology
There are two possible options available to Apple, a 7 inch screen and a 10 inch screen. An
organic light emitting diode (OLED) screen will likely to be used since it would allow Apple to
“construct a tablet with iPhone-esque battery life, such as 10 hours of video play or 20-30 hours
for e-reading purposes”32
Operating System
The user interface is said to be tailored made for the Apple Tablet but some reports have stated
that the user interface will have a steep learning curve. These reports conflict one of the
fundamental values of Apple of having easy to use products.33
E-Book Reader
The Apple Tablet is stated to be entering in the growing e-book reader market where Amazon’s
Kindle and Barnes and Nobles’ Nook are already in the market. As noted by Forrester, the ebook market is ready for explosive growth.34
Stylus
In 2009, Apple filed a patent that loosely provides evidence that the Apple Tablet will be
accompanied with a stylus but this goes against previous comments by Steve Jobs that stated that
“[Apple] invented a new technology called multi-touch. It works like magic, you don't need a
stylus, and it's far more accurate than any interface ever shipped.”35
Apps and Games
Apple’s Tablet is touted to be a gaming console and Electronic Arts has signed a partnership to
provide games to the tablet.36 In addition to games, developers are set to create a whole new set
of applications that will be compatible with the larger screen.37
31
"Why the Newton Failed, and the IPad Is Poised for Success | Edible Apple." Edible Apple | Apple
News, Rumors, and Analysis. Web. 10 Mar. 2011. <http://www.edibleapple.com/why-the-newton-failedand-the-ipad-is-poised-for-success/>.
32 Keizer, Gregg. "Apple Tablet Will Have 7-inch OLED Screen, Expert Says - PCWorld." Reviews and
News on Tech Products, Software and Downloads - PCWorld. 19 Jan. 209. Web. 10 Mar. 2011.
<http://www.pcworld.com/article/187215/apple_tablet_will_have_7inch_oled_screen_expert_says.html>.
33 Frommer, Dan. "Apple Tablet OS Has 'A Good Bit Of New Sexy To It', Says Someone Who Has Seen
It." Business Insider. 07 Jan. 2009. Web. 10 Mar. 2011. <http://www.businessinsider.com/apple-tablet-oshas-a-good-bit-of-new-sexy-to-it-says-someone-who-has-seen-it-2010-1>.
34 Epps, Sarah Rotman. "How Big Is The EReader Opportunity?" Forrester Research. 27 May 2009. Web.
10 Mar. 2011. <http://www.forrester.com/rb/Research/how_big_is_ereader_opportunity/q/id/54463/t/2>.
35 "Apple Files Tablet Patent for Stylus-controlled Device | T3 Magazine." Technology News and Gadget
Reviews | T3 Magazine Online. Web. 10 Mar. 2011.
<http://www.t3.com/news_article.html?articleId=12213>.
36 "Apple Files Tablet Patent for Stylus-controlled Device | T3 Magazine." Technology News and Gadget
Reviews | T3 Magazine Online. Web. 10 Mar. 2011.
<http://www.t3.com/news_article.html?articleId=12213>.
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Price
The price is expected to range from $500 to $800.38
Exclusivity Contract
In 2006, Apple and Cingular, agreed upon a deal where AT&T would receive roughly 10% of
iPhone sale, a small portion of Apple’s iTune revenue and exclusivity rights to the iPhone. In
return, Cingular provided network services and implemented many features on its network such
as visual voicemail and reinvented the in-store signup process.39
Given the success of the iPhone and AT&T’s dependence on the iPhone for revenue growth, it is
unlikely that AT&T will receive the same quality deal for a tablet exclusivity contract with
Apple. However, the Apple tablet could provide a revenue boost similar to that of the iPhone for
AT&T.
Data plans are projected to range from $15 for 250 MB and $30 for unlimited.40 It is predicted
441 to 1042 million Apple tablets will be sold in 2010.
In 2009, iPhone sales were approximately 25 million.43
37
"Apple IPad Rumours: 10 Things We Can Expect | T3 Magazine Online." Technology News and
Gadget Reviews | T3 Magazine Online. 21 Jan. 2010. Web. 10 Apr. 2011.
<http://www.t3.com/feature/apple-tablet-pc-rumours-10-things-we-can-expect>.
38 "Apple Tablet Rumour Gets Price Point and Release Date." Hi Tech Gadgets and Other Machines That
Go Bing! 13 July 2009. Web. 10 Mar. 2011. <http://www.machinesthatgobing.com/apple/apple-tabletprice-date/>.
39 Vogelstein, Fred. "The Untold Story: How the IPhone Blew Up the Wireless Industry." Wired.com. Web.
10 Mar. 2011. <http://www.wired.com/gadgets/wireless/magazine/16-02/ff_iphone?currentPage=1>.
40 "Apple Reveals More IPad 3G Data Plan Details." Wi-Fi Networking News. Web. 10 Apr. 2011.
<http://wifinetnews.com/archives/2010/03/apple_reveals_more_ipad_3g_data_plan_details.html>.
41 Arthur, Charles. "Apple IPad to Start a Boom? Tablet Sales Could Rocket to 57m in 2015 | Technology
| Guardian.co.uk." Latest News, Comment and Reviews from the Guardian | Guardian.co.uk. Web. 10
Mar. 2011. <http://www.guardian.co.uk/technology/blog/2010/feb/04/ipad-abi-tablet-sales-boom>.
42"IPad News: Big Tablet Sales Projected For 2010, Beyond – IPad.net." IPad News, Reviews, IPad
Games, IPad FAQs, IPad Accessories, IPad Tips Tricks, IPad Forums. Web. 10 Mar. 2011.
<http://www.ipad.net/ipad-news-big-tablet-sales-projected-for-2010-beyond.html>.
43 "Gartner: IPhone Sales Double in 2009 as Apple Claims Third Place in Smartphone Sales - Mac
Rumors." Mac Rumors: Apple Mac Rumors and News You Care About. Web. 10 Mar. 2011.
<http://www.macrumors.com/2010/02/23/gartner-iphone-sales-double-in-2009-as-apple-claims-thirdplace-in-smartphone-sales/>
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Appendix A - AT&T Revenue by Product Line
Wireless service
Voice
Data
Directory
Other
2009
48563
32314
25454
4724
11963
2008
44249
37321
24373
5416
12669
2007
38568
40798
23206
4806
11550
Average Annual Growth
13%
(10%)
5%
(1%)
(2%)
Appendix B - AT&T Revenue Breakdown
Appendix C - Telecommunication United States Market Share Breakdown
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Appendix D - AT&T SWOT Analysis44
Strengths
US' premiere wireless carrier based on number of subscribers
US' [2nd]largest provider of broadband
World's [2nd]largest communications holding company based
off revenue
Broad portfolio of complementary products and services
(wireless communications, local exchange services, longdistance services, data/broadband and Internet services, video
services, telecommunications equipment, managed
networking, wholesale services and directory advertising and
publishing)
Extremely capable network capacity - both physical (fiber
optics) and wireless (including a growing 3G network)
AT&T Wireless exclusivity with Apple's iPhone
Weaknesses
Increasingly more price
competitive market in both retail
and wholesale markets
Company obligations and
liabilities from old business unit
spin offs
Balance sheet - company more
leveraged that competitors within
the industry
Opportunities
Further industry consolidation (acquisitions)
Wireless growth, particularly through its partnership with
Apple/iPhone
Emerging markets/global expansion
Threats
Increasing ferocious competition
in the wireless arena
Emerging technologies - falling
behind smaller, more nimble
companies and operators
Increasingly more price
competitive industry pressuring
margins
Weather damage to antennas and
transmission lines
Appendix E - AT&T Wireless Customer Information45
Wireless Customers (000)
Net Customer Additions (000)
Total Churn (monthly)
Postpaid Customers (000)
Net Postpaid Customer Additions
(000)
Postpaid Churn
44
2009
85,120
7,278
1.48%
65,146
4,323
2008
77,009
6,699
1.68%
60,098
4,634
2007
70,052
7,315
1.67%
55,310
3,982
2009 vs.
2008
10.50%
9.00%
(20) bps
8.40%
(7%)
2009 vs.
2008
9.90%
(7.60%)
1 bps
8.70%
(16%)
1.16%
1.19%
1.27%
(3) bps
(8) bps
"WikiSWOT.com :: Free AT&T SWOT Analysis." AT&T SWOT Analysis. Web. 13 Mar. 2011.
<http://www.wikiswot.com/SWOT/15_Communication_Services/AT_T.html>.
45 "AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
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Appendix F - Satellite Global Market46
(In billion)
Satellite Services
Satellite Manufacturing
Launch Industry
Ground Equipment
Total
2008
84
10.5
3.9
46
144.4
2009
93
13.5
4.5
49.9
160.9
Percent Change
10%
22%
13%
8%
10%
Appendix G - Financial Statements
Income Statement
2009
2008
2007
Operating Revenues
Wireless service
Voice
Data
Directory
Other
Total operating revenues
48563
32314
25454
4724
11963
123018
44249
37321
24373
5416
12669
124028
38568
40798
23206
4806
11550
118928
Operating Expenses
Cost of services and sales
Selling, general and administrative
Depreciation and amortization
Total Operating Expenses
Operating Income
50405
31407
19714
101526
21492
49556
31526
19883
100965
23063
46801
30146
21577
98524
20404
Interest expense
Equity in net income of affiliates (see note 1)
Other income – net (see note 2)
Income Before Income Taxes
-3379
734
152
18999
-3390
819
-328
20164
-3507
692
810
18399
Income Taxes
Net Income
-6156
12843
-7036
13128
-6252
12147
Balance Sheet
Assets
Current Assets
Cash and cash equivalents
Accounts receivable
Prepaid expenses
Deferred income taxes
Other current assets
Total current assets
Property, Plant and Equipment
Goodwill
46
2009
2008
2007
3802
14978
1572
1274
2708
24334
100093
73259
1792
16047
1538
1014
2165
22556
99088
71829
1970
16185
1524
2044
2963
24686
95890
70713
"VITAL STATISTICS | Satellite Markets." Satellite Markets | SatelliteMarkets.com - Industry Trends,
News Analysis, Market Intelligence and Opportunities. Web. 20 Mar. 2011.
<http://www.satellitemarkets.com/node/9>.
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Licenses
Customer Lists and Relationships
Other Intangible Assets
Investments in Equity Affiliates
Postemployment benefit
Other Assets
Total Assets
Liabilities and Stockholders' Equity
Current Liabilities
Debt maturing within one year
Accounts payable and accrued liabilities
Advanced billing and customer deposits
Accrued taxes
Dividends payable
Total Current Liabilities
Long-term Debt
Deferred Credits and Other Noncurrent Liabilities
Deferred income taxes
Postemployment benefit obligation
Other noncurrent liabilities
Total deferred credits and other noncurrent
liabilities
Stockholders' Equity
Common stock
Additional paid-in capital
Retained earnings
Treasury shares
Accumulated other comprehensive loss
Noncontrolling interest
Total stockholders' equity
Total Liabilities and Stockholders' Equity
48759
7420
5644
2921
0
6322
268752
47306
10582
5824
2332
0
5728
265245
37985
14505
5912
2270
17291
6392
275644
7361
20999
4170
1696
2479
36705
64720
14119
20032
3849
1874
2416
42290
60872
6860
21399
3571
5027
2417
39274
57255
23803
27849
13350
19196
31930
14207
24939
24011
14798
65002
65333
63748
6495
91707
39366
-21260
-14408
425
102325
268752
6495
91728
36591
-21410
-17057
403
96750
265245
6495
91638
33297
-15683
-380
0
115367
275644
Note 1
“Equity in net income of affiliates decreased $88 in 2009. Our investment in Telmex and
Telmex Internacional decreased $119, reflecting lower operating results and currency translation
losses, partially offset by $36 of improved operating results at América Móvil.”47 Telmex and
América Móvil are Mexican telecommunication companies.
Note 2
“Other income (expense) – net We had other income of $152 in 2009, other expense of $328 in
2008 and other income of $810 in 2007. Results for 2009 included a $112 gain on the sale of
investments, $100 of interest and leveraged lease income, and $42 of gains on the sale of a
professional services business, partially offset by $102 of asset impairments”48
47
"AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
48 "AT&T 2009 Annual Report." AT&T. Web. 1 Mar. 2011. <http://www.att.com/gen/investorrelations?pid=9186>.
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