AT&T Case study Essay

1. Review AT&Ts past financial policies and financing choices. Were these divert for the genius of the business?AT&T Corp., integrity of the largest companies in the unify States, has had a persistent and storied history. Initially, AT&T operated as a monopoly, but in 1982, Justice Department, broke up the ac phoner into individual companies. Prior to divesture (in 1981), AT&T was the largest private company in the populace and despite many challenges, AT&T remained an archetypical widow-and-orphans stock for a long time. The term widows and orphans was used to describe stocks with a relatively high degree of condom and dividend income and numbers from exhibit 1speak for themselves. By 1982 the company increased all its key financial indicators.Revenues and operating earnings increased 12% and 6% respectively comparing to twelvemonth 1981. In ten years, the company increase its revenues, net income, cash and assets more than 2 times. Its worth to mention that AT&T was able to reduce its arrive outstanding debt by $ 725 mil and at year-end, the companys debt ratio stood 42.3% bring from 46.7% in 1980. In entree, AT&T neither cancelled nor lowered dividends, and unaccompanied increased dividend per share by 10% annually. Aforementioned facts suggest that companys financial policies and financing choices were appropriate for the nature of the business and that AT&T was one stable, reliable and profitable companies in the institution by 1982.2. In what fundamental shipway will AT&Ts business pitch in the in force(p) coming(prenominal)?Throughout most of the twentieth century, AT&T held a monopoly on phone service in the United States. In 1982, through an agreement surrounded by AT&T and the U.S. Department of Justice, AT&T agreed to divest itself of its topical anesthetic telephone operations but harbor some of its businesses. The principal provision of the fair settlement was that the corporation would be disunited into seven completely in dependent regional corporations. Each regional company would confront to provide local telephone and early(a)(a) telecommunication services in addition to ability to sell telephone equipment. The be or bracing AT&T would focus on long distance, R&D and manufacturing arms.3. In view of AT&Ts changing strategical and economic surroundings, what debt policy would you recommend? What other financial policies are appropriate for the new AT&T? What are possible to be the consequences of these financial policies?The new AT&T was no more monopoly and the companys management group face new challenges. First of all, I return that when AT&T was monopoly, managers were averse to venture and led more financially nonprogressive policy. After divestiture, it was clear that the external environment changed and effective actions needed to be taken to beat off intense competition. Moreover, at that place were several serious questions about future profitability of the new AT&T divisions (especially Western Electric) and it was not clear whether they would be able finance their operations in competitive markets. Taking into consideration in a higher place stated facts, at that phase I would recommend to shift gears from debt financing and budge toward equity financing.In addition to the change in financial policy, I would overly recommend considering a new acquirement strategy to reach more diversify portfolio and to broaden the companys background signal in other areas.