This document analyzes AT&T's strategy using Porter's Five Forces analysis and a PESTEL analysis. It finds that the threats of new entrants and substitute products are high for AT&T due to capital costs, market competition, and price wars between providers. However, the bargaining power of suppliers is low. It also examines AT&T's value chain, core competencies, competitive advantages in services, and corporate strategy of vertical integration. Recommendations include vertically integrating security platforms, expanding IP services, and unifying wireline and wireless offerings.

1. AT&T Inc.
Strategy Analysis
KYLE HUGHES AND MAIREAD COOGAN
DECEMBER 7, 2016

2. Industry Analysis
PORTER’S FIVE FORCES ANALYSIS
PESTEL ANALYSIS

3. STRATEGYEXPERT.COM3
Porter’s Five Forces
THREAT OF NEW ENTRANTS
- HIGH
• High capital costs
• High market competition
SUBSTITUTE PRODUCTS -
HIGH
• Customer's short-term
contracts
• Price wars between large
wireless phone service
providers, mainly
Apple's smartphones
and Sprint's pay-as-you-go
plans.
BATGAINING POWER OF
SUPPLIERS - LOW
• Customers continue to be
price sensitive in selecting
offerings, especially in the
wireless area, and access
to video and broadcast
services.
• Expect continued pressure
on pricing during 2016 in
response to intense
competition.
BARGAINING POWER OF
BUYERS - HIGH
• Consumers continue to
demand instant connectivity
and yet AT&T faces a
regulatory environment that
appears increasingly
unfriendly to investment in
broadband services.
COMPETITION
•Competition continues to increase for
communications and digital entertainment
services. Technological advances have expanded
the types and uses of services and products
available.
•Major competitors include: Verizon Wireless,
Sprint, T-Mobile/Metro PCS, and many regional
providers of cellular, PCS and other wireless
communications services and resellers of those
services.
“The goal of competitive strategy for a
business unit in an industry is to find a
position in the industry where the
company can best defend itself
against these competitive forces or
can influence them in its favour.”
Micheal Porter
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4. [date] [Name] STRATEGYEXPERT.COM
4
P.E.S.T.E.L Analysis
Economic
• 2015 operating revenues increased
10.8% / $14,354 (in millions).
• Company Caution: Incurred major
transition costs with the 2015 development
in Mexico.
• Stock Prices: $38.61 (12/2/16)
Social
• “We expect that all our major customer
categories will continue to increase their
use of Internet-based broadband/data
services. We expect continuing declines in
traditional telephone service revenues.”
Environmental
• Trends toward sustainability
• Reducing carbon footprint worldwide
• Alternative energy sources available-
costly
• Government regulation on greenhouse
gas emissions
• EPA Smartway program (transportation
emissions management)-AT&T is a
participant
Legal
• Regulatory burdens that are no longer
appropriate in a competitive
telecommunications market
• 2015 FCC’s released order – significantly
expanded the FCC’s existing authority to
regulate the provision of fixed and mobile
broadband Internet access services. AT&T
and other providers challenged the FCC’s
decision before the U>S> Court of Appeals
for the D.C. Circuit. Look up decision –
supposed to be announced early 2016
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Not to be sold or published.
Political
• AT&T subsidiaries operating within the
U.S. are subject to federal and state
regulations. AT&T subsidiaries operating
outside the U.S. are subject to national
and supranational regulations in the
markets where service is provided.
• Telecommunications Act of 1996
Technological
• Communications industry continues to
move toward Internet-
based technologies that are capable of
blending traditional wireline and
wireless services.

5. Capability Analysis
VALUE CHAIN ANALYSIS
VRIO ANALYSIS

6. STRATEGYEXPERT.COM
Value Chain
Access-Development to Rural/Underserved Areas
Company Energy Use
Compensation & Benefits
Customer Privacy
Primary
Activities
Support
Activities
AT&T Network Employees Supply Chain Communities Customers
Education
Greenhouse Gas Emissions
Network Reliability
Network/Data Security
Product Design: Energy Efficiency
Product Recycling/Reuse
Social/Environmental Innovation

7. STRATEGYEXPERT.COM
V.R.I.O
7
Core Competencies Valuable Rare
Costly to
Imitate
Organized to
Capture Value
Customer Service × ×
High Quality
Voice/Data Service
× × ×
Combination
of Services
× × ×
Brand Recognition × × × ×

8. Competitive Advantage
High Quality Voice and Data Service
◦ 4G LTG Speeds
◦ HD Voice
◦ VoIP
Combination of Services
◦ Wireless, TV, Internet, E-Mail, Home Phone, Digital Life and Bundles

9. Value Proposition
AT&T's Size
◦ November 3, 2016 - AT&T was the largest US telecommunications (or telecom) player. Verizon was the
second-largest player, and T-Mobile was the third-largest player by market capitalization. Sprint’s market
capitalization was lower than T-Mobile’s.
AT&T's Valuation Multiples
◦ AT&T was trading at a forward PE (price-to-earnings) multiple of ~12.24x, higher than Verizon’s ~11.71x.
AT&T’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and
amortization) metric was ~6.28x, higher than Sprint’s and T-Mobile’s ~5.09x and ~6.06x, respectively.
◦ November 3, 2016 - AT&T’s dividend yield was ~5.4% higher than Verizon’s ~4.9% dividend yield.

10. Corporate Strategy
Assessment
CORPORATE ADVANTAGE
VERTICAL INTEGRATION

11. Corporate
Advantage
AT&T's Global Network Reliability increases global
communications networks and has revolutionized the way the
world lives, works and plays.
Customers in 29 markets can download an HD movie in 36
seconds, a TV episode in 3 seconds and 25 songs in 1 second.
High-speed mobile internet network covers nearly 380 million
people and businesses across the U.S. and Mexico.
Advanced services delivered to nearly 3.5 million businesses
on 6 continents.

12. Vertical Integration
Proposition:
AT&T Secure Voice
Platform protecting customers telephone
information and identity by offering a private
secure defense platform and eliminating
robocalls and identity theft.
◦ Similar to AT&T's NetBond for businesses
In-house Product Design and Supply which
would allow for easier coordination and
communication about product sales targets
and customer needs, while increasing energy
efficiency.
Current:
AT&T is protecting data on mobile
devices by offering the Skycure Mobile Threat
Defense Platform.
AT&T outsources to equipment suppliers
for the majority of products.

13. Recommendations
Stay Safe
◦ Vertically integrate security platform for individual and family plan customers.
Go Global
◦ Continue to expand U-Verse high-speed broadband and video offerings.
◦ Continue hot-spot merging with companies.
Unify
◦ Develop IP-based services that allow customers to unite their home or business wireline services with their
wireless service.
◦ Focus on blending traditional wireline and wireless services.
◦ Vertically integrate product design and supply.
Fight for Growth
◦ Mature telecommunications space via increased spectrum, capacity, and data services.

14. QUESTIONS?
THANK YOU
Kyle Hughes
khughes5@tulane.edu
Mairead Coogan
mcoogan@tulane.edu