Essay on Prestige Telephone Company – Case Study

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Prestige Telephone Company – Case Study

In April 2003, Daniel Rowe, president of Prestige Telephone Company, was preparing for a meeting with Susan Bradley, Manager of Prestige Data Services, a company subsidiary. Partial deregulation and an agreement with the state Public Service Commission had permitted Prestige Telephone to establish a computer data service subsidiary to perform data processing for the telephone company and to sell computer service to other companies and organizations. Mr. Rowe had told the commission in 1999 that a profitable computer services subsidiary would reduce pressure for telephone rate increases. However, by the end of 2002 the subsidiary had yet to experience a profitable month. Ms. Bradley felt only more
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All accounts of Prestige Data Services were separated from those of Prestige Telephone, and each paid the other for services received from the other.

From the start of operations of Prestige Data Services in 2000 there had been problems. Equipment deliveries were delayed. Personnel had commanded higher salaries than expected. And most important, customers were harder to find than earlier estimates had led the company to expect. By the end of 2002, when income of Prestige Telephone was low enough to necessitate a report to shareholders revealing the lowest return on investment in seven years, Rowe felt it was time to reassess Prestige Data Services. Susan Bradley asked for more time, as she felt the subsidiary would be profitable by March. But when the quarterly reports came (Exhibits 1 and 2), Rowe called Bradley to arrange their meeting.

Rowe received two reports on operations of Prestige Data Services. The Summary of Computer Utilization (Exhibit 1) summarized the use of available hours of computer time. Service was offered to commercial customers 24 hours a day on weekdays and eight hours on Saturdays. Routine maintenance of the computers was provided by an outside contractor who took the computer off line for eight hours
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