Bob's Gutsy Leadership Blog

AT&T: A Weak Business, $200 Billion of Debt and a Focus Problem!

For the past three years, AT&T has really been struggling. During that period, the S&P 500 Index gained +38%, while the AT&T stock price declined by -21%. Debt now stands at $200 billion and Moody’s recently downgraded AT&T’s rating to two notches above junk.

Their prime competitor used to be just Verizon. But…things have changed dramatically for AT&T. Now the competitors are not only Verizon but also Dish, Netflix, Disney, Amazon, Hulu, and a whole bunch of other streaming/media companies. That is because AT&T bought Direct TV for $67 billion and Time Warner for $104 billion. The latest new competitor is Sprint/T-Mobile. The merger of the two has finally been approved, and they will be a major player with 130 million subscribers. AT&T has roughly 150 million subscribers, about the same number as Verizon.

Most financial experts believe AT&T bought Dish and Time Warner because that didn’t see any major opportunities to grow with just their wireless business. On the other hand, they have acquired two giant companies that are in very rapidly changing markets. Further complicating things, Warner has many diverse properties such as HBO, Warner Brothers, CNN, TBS, Cartoon Network, Turner Classic Movies, and TNT.

AT&T indicates that the grand vision begins with combining all the major elements of its media and telecom businesses. With such a combination of media assets, the theory goes, AT&T can achieve unprecedented advantages. It believes it will be able to differentiate its fast-commoditizing wireless network by offering customers deals on it proprietary content. It believes it can expose its content to vast audiences through all its networks. Because it will be able to collect staggering volumes of customer data through its wired, wireless, and satellite networks, it hopes to enable advertisers to target their messages with new precision.

AT&T claims its next step in this transformation, likely the biggest and most visible step, will be to introduce a video-on-demand internet streaming service – a Netflix competitor. Disney’s new streaming service, called Disney+, will also be launching. By the way, Apple, Amazon, and Comcast announced plans to do roughly the same thing.

Meanwhile, Verizon has opted to avoid this chaos, and just do 5G with excellence. AT&T needs to worry about this as well, since the wireless business is their cash cow, and 5G is a big change.

Stepping back, you have to wish AT&T luck, but they have worked themselves into an incredibly messy situation, with many competitors with deep pockets ready to thwart their efforts. Additionally, their various acquisitions bring different cultures that need to be integrated and new markets that they need to quickly learn.   Top management at AT&T is going to be torn in many directions, and achieving any kind of focus is going to be very difficult.

It is one thing to have a fabulous dream, it is another thing to develop a simple detailed high-impact plan, create a unified and enthusiastic workforce, and then execute the necessary steps to pull it off.

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