News reports say AT&T share price is at a 10-year low. So let’s take a closer look at what’s happening at the company and when we can expect both recovery and growth. As a wireless and telecom industry analyst for more than thirty years, I have been watching and commenting not only AT&T, but all their competitors and in fact, the entire telecom industry transform. Based on that, I believe AT&T is at a transition point.
We’ve heard this refrain before. Several times in fact. AT&T has it within themselves to become a leader once again if they do the right things correctly now and going forward.
AT&T is at a critical transition point
First thing to understand is the history of AT&T. It has a long and rich history, but you may be surprised that it is not the company you think it is. Let’s take a trip down memory lane.
- AT&T started when Alexander Graham Bell invented the telephone around 1876.
- In the early 1980’s AT&T divested. It became the nation’s largest long-distance company and there were seven, separate Baby Bells which sold local phone service. There are also quite a few smaller local phone companies still scattered across the United States in small towns.
- In the late 1990’s, AT&T was struggling for survival.
- Eventually, in 2005, SBC, which was the smallest Baby Bell, acquired AT&T. By this time, AT&T was a mere shadow of its former self.
- SBC rebuilt the AT&T brand and today along with the 5G wireless revolution, which is not only impacting the wireless industry, but other industries as well, robust growth is expected for the wireless sector for years to come.
In 2005, after acquiring AT&T, SBC changed its name to AT&T, took over executive management and that has been what we have known as Ma Bell ever since. However, the company and key executives were those of SBC.
So, as you can see, AT&T has changed its stripes time and time again in the past.
In fact, at the same time around 2005, SBC acquired AT&T, they also acquired BellSouth and Cingular, the wireless giant. This combination of local, long-distance, and wireless gave them plenty of runway for growth over the next decade.
Original AT&T no longer exists
So, AT&T is not the same, historic company we all grew up with. That company is gone.
The AT&T of the past was a slower growing telephone company. The AT&T of today and going forward acts more like a smaller, entrepreneurial company.
This is a good thing, but this also creates waves of uncertainty with both hits and misses.
Over the years, each time when growth started to slow, the new AT&T looked for opportunities to expand and keep their shareholders happy.
More than a decade ago, AT&T was the first and only company to offer the Apple iPhone and that lasted for a couple years. Apple first approached Verizon but was turned down. AT&T was their second choice, and they ran with it.
This was successful for both Apple and AT&T.
That started the next growth wave of super smartphones like iPhone, Android and others which has grown wireless carriers and smartphone makers.
Verizon, T-Mobile, AT&T and Sprint look for new growth opportunity
As time passed, and growth once again slowed, public companies like AT&T, Verizon, Sprint and T-Mobile needed to find new areas to move into. They needed growth to both attract and maintain their investor base.
During the next 10 years, AT&T and Verizon went down some very strange paths. Which is where we are today.
- AT&T tried moving into the news and entertainment space by acquiring DirecTV and Time Warner which became WarnerMedia.
- Verizon acquired AOL and Yahoo wanting to give Amazon.com a run for its money.
- T-Mobile ultimately acquired Sprint, got stronger and stayed in wireless.
Both AT&T and Verizon claimed this was the right path for growth going forward. However, looking back, both paths were very wrong.
AT&T on wrong growth path during past decade
Verizon was more fortunate when it comes to recovery. They never really integrated AOL and Yahoo, so it was quicker and easier for them to spin them off and get back to business in wireless.
AT&T was not so lucky.
They spent the last several years actively moving into the news and entertainment space through acquisitions.
If it had worked, and if it were not for Covid-19, this move could have transformed AT&T into one of the largest and most powerful companies in the world.
However, it did not work and now AT&T is struggling as it divests all these different businesses.
AT&T recovery can quickly begin with 5G wireless
The good news for AT&T is, when they are done, they could once again show strong growth as wireless continues to move toward 5G.
However, in recent years their growth has slowed. Them seemed off-track. They have fallen to the number three position in the wireless marketplace behind Verizon and T-Mobile.
Growth waves are a funny thing. If you are a leader, you need to stay a leader. However, if your growth slows or reverses, it becomes extremely difficult to turn things around again.
Over the last several years we have seen the AT&T growth wave going in the wrong direction. This needs to be corrected immediately then growth needs to start once again.
If AT&T can focus on recovery and start growing once again, they could once again be seen as a strong player in 5G wireless.
AT&T recovery could happen quickly, if they take the right steps in the right order.
After all, even today, they remain one of the top three players in the 5G wireless networking space.
One area of concern is how AT&T seems to be recklessly cutting all their costs like a drunken sailor swinging a buzz saw.
AT&T must cut costs strategically like a surgeon
What they should be doing is acting like a surgeon and making strategic cuts.
This is the only way to reduce costs while not impacting their ability to recover quickly. Yet, this is not what they are doing.
I have talked with many users about their experience with AT&T service, both with wireless and landline service.
In fact, I have talked with many customers of Verizon, T-Mobile and AT&T. Recently I am seeing a trend where many users are disappointed with the quality and reliability of 5G wireless service.
Today, each network has strengths and weaknesses in different areas of 5G. It all depends on where you are located and how busy it is when you are using the network.
So far 5G wireless experience has been disappointing for users
In addition, the whole 5G wireless experience from all wireless carriers has been spotty and even disappointing for many users, so far at least.
Users tell me they are not getting the speeds commonly talked about in television commercials or news stories.
I believe this is a temporary issue. Looking ahead a few years I fully believe 5G will be ubiquitous and everyone will be happy. That means users, investors and workers.
However, this is a real issue today and the carriers are not doing a good job with their messaging.
According to users, today it seems Verizon, T-Mobile and AT&T public relations is way out ahead of their headlights with 5G claims.
In the long term, this will harm the relationship wireless carriers have with their customers.
5G wireless is growth opportunity for AT&T, Verizon, T-Mobile
In coming years, 5G will be a big growth opportunity in wireless for AT&T, Verizon and T-Mobile.
Not only is the wireless industry seeing a huge growth opportunity, but this is expanding to other industries as well, like healthcare, automotive and so much more.
In addition to this common wireless issue, AT&T faces more challenges in their attempt to quickly recover from the DirecTV and WarnerMedia misstep.
How quickly can and will AT&T recover?
My take is AT&T can recover. I think they eventually will recover. They have been in this position in the past and have recovered.
The real question is how quickly will recovery happen?
The misdirection companies often take is caused by the need to show growth to keep investors happy. This often causes companies to move beyond their core strengths and into the unknown.
This is where companies like AT&T and Verizon went off-track.
The AT&T recovery will take time, but I believe it can and will ultimately happen.
AT&T recovery all depends on whether they focus on wireless growth opportunities, and if they can redirect their cost cutting efforts to be like a surgeon, rather than cutting down the entire forest like they have been doing.
What happens next and how quickly they recover is entirely up to AT&T. I hope they change sooner rather than later. I hope they make the right decisions moving forward. They need to think and act like a surgeon, not like a drunken sailor swinging its chain saw and cutting the entire forest down.
