Term Paper on "AT&T Trends, Environment, and SWOT Analysis"

Term Paper 9 pages (2685 words) Sources: 14

[EXCERPT] . . . .

AT&T Wireless

The objective of this paper is to complete a situational analysis of AT&T Wireless (also known of as AT&T Mobility), specifically focusing on the environmental factors, broader industry-wide trends, and a SWOT analysis of the company. In addition, an analysis of the segmentation strategy and recommendations for further enhancement are provided in this paper. These foundational elements are in turn used to analyze how to customer churn for the company can be minimized. From the analysis completed of AT&T Wireless serving as the foundation for analyzing their customer churn challenges, two to three alternative plans to minimize churn are also presented. From these, the best possible alterative is provided. It is important to note that churn is a characteristic of communications services industries (Ahn, Han, Lee, 2006) and that churn is often best battled through the use of bundling and the development of programs to inspire customer loyalty (Bienenstock, Bonomo, Hunter, 2004). AT&T Wireless is noteworthy both for its approach to streamlining marketing strategies with Cingular while retaining customers and minimizing churn (Wasserman, 2007) and secondly, in its ability to establish one of the leading brands in wireless telecommunications services in the midst of major industry consolidation (Zimmerman, 2007) provide ample evidence as to how effective the company continues to be in addressing major challenges and obstacles from a strategic perspective.

Environmental Analysis and SWOT Analysis

AT&T is one of the best-known brands globally in the telecommunications industry (Ritson, 2007). AT&T's brand is further strengthened by its enterprise services (Engebretson, 2006) and wireless telecommunications services. Despite the industry going through significant consolidation and the oligopoly that exists with four companies comprising nearly 80% of the total industry service revenues including at & T. Wireless (formerly Cingular Wireless), Verizon Wireless, Sprint Nextel and T-Mobile USA, AT&T has continually been able to retain its largest digital voice and data network which has been able to sustain 290 million users of their network in the top 100 U.S. markets. This has been accomplished through a combination of foresight branding decisions (Wasserman, 2007). The company's segmentation strategies have concentrated on early adopters of higher bandwidth applications of wireless networks, investing $13B in upgrading its GSM network to support the higher performance networks that can accommodate 3G networking speeds. As there is a concentration of four dominant competitors, partnerships are also critical for success and lasting differentiation. The relationship that AT&T Wireless has with Apple is a case in point. Participating in the initial iPhone launch gave the retail network of AT&T stores global exposure on June 20, 2007, and soon thereafter in November of 2007 Financial Times broke a story of a high speed 3G iPhone that is in the development and planning stages in late 2007 (Allison, 2007). The discussion by Allison (2007) a technology reporter for Financial Times underscores how critical the integration of development efforts between Apple and AT&T Wireless to ensure 3G performance is optimized over their ALLOVER network. In the short-term, Apple's significant brand equity brings value to AT&T Wireless stores in the short-term and further foundational elements to provide for minimizing churn and customers moving to other carriers. The Apple partnership strategy is actually aimed at minimizing churn in the long-term by continually adding optimized network performance via the investments in 3G technology. Presented next in this paper is a SWOT analysis of AT&T Wireless.

SWOT Analysis

Strengths

World-class brand image - Clearly AT&T is one of the leading brands globally, and in the context of U.S. wireless telecommunication providers, the branding strategy following the merger resulting in Cingular being 100% owned by AT&T Wireless was well orchestrated and applauded in its execution by marketing experts (Wasserman, 2007).

Marketshare leader position - According to (Kharif, Burrows, 2008) in a recent Business Week article, AT&T Wireless has 22% market share in the U.S. And has significant 7 upside potential due to the sales of Apple iPhones and the follow-on services for these unique devices. AT&T Wireless also leads with the number of users in the U.S. alone with 290 million people using their phones.

Exceptionally strong financial position - AT&T has one of the strongest and liquid balance sheets in the telecommunications industry. The company had cash and cash equivalents improved from $760 million in fiscal 2004 to $2,418 million by fiscal 2006, which is the strongest position in the entire telecommunications industry.

Weaknesses

Lack consistent content partnership strategy - Unlike competitor Time-Warner and its many subsidiaries in the wireless, broadband and content creation including entertainment subsidiaries, AT&T Wireless is not vertically integrated to the extent of its dominant competitor. However the company has in March of last year completed an agreement with ION Media Networks to gain access to its television content. Included in this partnership is support for the U-verse television service. This gives AT&T Wireless the option of offering three television channels over its convergence devices. As Time-Warner relies on content and its bundling on devices to minimize churn, this area of weakness is critical for AT&T Wireless to overcome and turn into a strength to get churn under control.

Strength in U.S. yet limited globally - Despite AT&T Wireless not specifically defining their geographic breakout of revenues in the 10Ks on file with the Securities and Exchange Commission, it is clear that their dominance is concentrated only in the U.S. Global competitors including British Telecom, Deutsche Telekom Group, Vivendi, and Vodafone have consistently shown the ability to generate the majority of their revenues out of their own native nation. 40% of revenues from Deutsche Telekom Group were generated outside of the Germany and Benelux region of Europe.

Opportunities

Global IP Services including transaction support - With the launch of 3G compatible networks and the corresponding security inherent in these networks, there is a high level of anticipation that online banking will now grow exponentially (Cline, 2008). AT&T Wireless is well positioned to take advantage of the growth of entirely new applications for wireless networks given their technological leadership in 3G network development. These areas including video streaming, text messaging and support for segmentation models based on the unmet needs of consumers for transaction services on their 3G compatible cellular phones.

Integration of wireless and telecommunication networks - the integration and assimilation of the BellSouth operations and networks including the development of Voice over IP (VoIP) programs throughout the Southeastern U.S. presents significant opportunities for the company to expand new services with a customer base they have not developed as of today.

Threats

Competition that is increasingly relying only on price - Given the increasing churn that is happening across the wireless telecommunications vendors that are competing for dominance of the U.S. And global wireless market, price has rapidly become the single differentiator everyone is relying on. AT&T Wireless competes with Cox Communications for example, a company that has worked very hard to overcome their high customer churn rates in both telecom and cable TV entertainment programs.

Customer churn in major segments - There is increasingly a high level of churn in the enterprises that had at one time standardized on AT&T Wireless for their entire mobile and wireless telecommunication requirement. There have been analyses completed that show the merger of AT&T Wireless with BellSouth have created greater opportunities to reduce churn through creative building programs and the ability to create more all-encompassing bundles that are aimed at unmet communication needs (Beard, Ford, Saba, 2006). The use of bundling, and for enterprise customers, the opportunity to offer a very high level of accountability over network and customer service (sometimes called "one throat to choke") is a significant opportunity for AT&T Wireless going forward (Bienenstock, Bonomo, Hunter, 2004).

Signs of wireless saturation in major markets - According to industry sources, wireless saturation across 70% of the total market in 2006 (Zimmerman, 2007) a point that AT&T Wireless and their competitors are finding in the declining of their average revenue per user (ARPU), a standard measure of profitability in the wireless telecommunication industry, continues dropping. This is of major concern to every competitor in this market, as it signals price competition, increased customer churn, and a more difficult path to attaining profitability over the long-term with customers.

Regulatory pressures on many aspects of their operating model - in the U.S., the FCC is taking a very aggressive stance on the emerging areas of IP-based network services, looking to have AT&T Wireless, its subsidiaries and competitors on a regional basis and requiring registration and compliance to networking laws. Compliance is expensive for AT&T Wireless and its competitors as a result.

Segmentation and Churn

At present the industry relies on two dominant approaches to defining… READ MORE

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