Essay about AT&T Case Study

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Selected Topics in Finance ΙΙ Financial Report Nanyang Business School Singapore 20.02.13 Innholdsfortegnelse 1. Introduction In this report we will identify business risk that AT&T experienced due to their divestiture in 1982. We will conduct our analysis based on financial concepts, and finally recommend necessary actions that should have been conducted when the company formulated its financial policy in 1983. 2. AT&T Background AT&T was founded in 1876 by Alexander Graham Bell. Prior to the divestiture AT&T had been a force to be reckoned with for over a century within the telephone service industry. Before the divestiture the…show more content…
We will further discuss what led to this situation, and give a recommendation on the changes that should have been made prior to the divestiture in 1984. 5. Pre Divestiture Business Risk As a consequence of the governments intervention, the AT&T lawsuit settlement, as well as the shift in the telecommunication industry, it was clear that AT&Ts local telecommunication business was slowly moving away from a monopoly franchise environment. It was moving towards a more competitive environment characterized with more consumer choice and greater competition. Companies such as IBM saw the divestiture of AT&T as an opportunity to provide new telecommunication equipment and services, which would allow them to gain a higher market share. AT&T's stock had up till then been regarded as a stable utility-type stock because of its steady growth and consistent dividend yield. However, AT&T should have kept in mind that they would not have as much market control in the future as they did prior the divestiture, much due to the intensifying competition and regulatory environment changes. Firstly, the antitrust lawsuit followed by a sudden divestiture could cause uncertainties towards the company’s future and might change the shareholders perception of AT&T in an unfortunate way. Second, the seven new corporations would be highly independent, and therefore a major rearrangement of the capital structure would be vital. It is likely

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