How AT&T’s strategy made it the world’s largest telecommunications company by revenue

How AT&T’s strategy made it the world’s largest telecommunications company by revenue

Started by Graham Bell’s company, AT&T has grown exponentially to become the largest telecom company worldwide. Let’s review its history and see what business strategies enabled it to grow…

AT&T is the world’s largest telecommunications company and America’s second-biggest mobile phone services provider.

Established in 1885 as a subsidiary of Graham’s American Bell Telephone Company, AT&T (American Telephone and Telegraph Company) is a pioneer and front-runner in the telecommunications industry. 

Today, it provides wireless phone coverage, fiber internet, business solutions, and the latest 5G technology to businesses and individuals. With more than 200 million wireless customers in the US, AT&T continues to power the telecommunications industry forward – just like it always has since its inception.

AT&T’s market share and key statistics:

  • Net Revenue of $168.8 billion
  • Net Income of $21.4 billion
  • $551 billion worth of assets globally
  • Stock price of $18.6 as of December 2021
  • Market capitalization of $119.2 billion
  • 203,000 employees across the globe
  • Operations in more than 200 countries
  • Leading market share of 44.1% in the US wireless subscription market
  • Market share of 27.8% in the satellite TV providers industry
  • Ranking 13th among Fortune 500 Companies
  • #1 telecommunication company in the world by revenue

As the chief innovator in the telephone industry, AT&T’s position as a market leader is completely justified. That being said, the journey of AT&T has been far from smooth. It began under the inventor Graham Bell, and with the proliferation of technology, the company grew rapidly. However, AT&T had to divest due to government regulation, but it regained its top position through strategic acquisitions and capitalizing on opportunities. 

Let’s analyze AT&T’s history to learn what business strategies enabled it to grow sustainably and achieve monumental success.

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AT&T Kicks Off In The 19Th Century As Part Of The Bell Companies

The story of AT&T kicks off in late 19th century England with the inventor Alexander Graham Bell.

As there was hardly any competitor, AT&T was able to expand and capture significant market share.

How Did AT&T Start? 

AT&T was established as a subsidiary of Graham Bell’s, American Bell Telephone Company in 1885.

The parent company was formed after the merger of Western Union Telegraph and Bell Telephone Company. The former was a major telegraph operator, while the latter was the pioneer of telephones. Bell signed local contracts in the US to expand telephone services. 

A major manufacturer, Western Electric was acquired to assist in telephone making. However, the company could only integrate its telephone exchanges, not other operators. 

AT&T was established to bridge that void and initiate expansion for long-distance lines.

AT&T’s Business Strategy Helps It Expand

It’s no surprise that AT&T wanted to reap maximum benefits before its patents would expire.

The telephone network was in its initial stages in those days, with siloed little networks scattered across the states. Hence, the time was ripe for AT&T to grab the opportunity and become the primary telecom company in the US.

As blizzards wreaked havoc in the UK adversely impacting the overhead connectivity network, AT&T responded by aggressively expanding its underground network of landlines. Seeing the strength and potential growth of AT&T, the public invested heavily in the company. Realizing that its planned expansion to connect various areas in the states would be more expensive than estimated, the company floated shares several times. Each time, both individual and institutional investors responded positively.

With increased public interest and still a huge opportunity to grab the landline market, AT&T's stock remained one of the best-performing ones nearing the 20th century. 

The reason? AT&T was not only the only big company in the landline industry, but it was also highly efficient in terms of processes and costs.

What Was The Main Strength of AT&T?

The main strength of AT&T was the lead it had in telephones due to Bell's innovation. This would become the base of the Bell System, a monopolistic system for decades to follow. 

The telephone was the invention of Alexander Graham Bell. He founded several companies, one of which was AT&T. After successful networks were installed in the UK, Bell utilized AT&T to become the primary landline company in the US. Though other small operators also existed, none were the size of AT&T.

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The company had dozens of patents that helped it stay competitive and, in fact, maintain a monopoly in telephones.

But was it just Bell's invention and the consequent patents? Not at all! It required business acumen and strategies to build a respectable company and expand it. Bell's local contracts and acquisition of telegraph companies helped establish a foundation for AT&T.

However, in the next few decades, other companies began entering the market, giving a tough challenge to AT&T. Arising to the challenge, the company planned to expand and prepare for the incoming rush of new companies.

Key Takeaway 1: Identify Industry Gaps and Get First Mover’s Advantage

Recognizing opportunities and pouncing on them was at the heart of AT&T’s business strategy.

The merger between Western Union Telegraph and the Graham Bell Company had left out a tiny yet incredibly important facet of telecommunication: long-distance. Immediately recognizing the gap, AT&T was set up. Therefore, the demand for the company’s product came as a given.

However, simply fulfilling a gap was not enough to guarantee business success. It needed to enter the industry smartly, or the competition could easily reciprocate. Getting patents for its tech was the first, necessary, order of business. The next: making a splash. This opportunity came when the disaster struck the UK in the form of blizzards. AT&T made communication possible with its set up of a long, expansive, and surprisingly for everyone, underground landline network. The development stood out and spotlighted the bright future in telecommunications, and the industrialists, as well as commoners alike, were ready to invest in this future-geared company. 

Just like that, AT&T made the impact and impression it needed to set the stage for success.

AT&T Transforms By Tackling Public Image and Quality Issues 

As AT&T entered the 20th century, it had the momentum to keep expanding. 

AT&T initially acquired its parent company to become AT&T Corp. As small competitors sprang up and its patents expired, AT&T geared up for tough competition. In a few decades, cross-shore connections were achieved, and they marked a new beginning of growth for the company.

What Did AT&T Do Once The Patents Expired? 

In 1894, AT&T’s patents expired. Now the challenge was to maintain its competitive position.

After a restructuring process in 1899, AT&T purchased its parent company and became AT&T Corp. Compared to the scattered small phone companies, AT&T now had double the assets and resources. 

With the number of phones skyrocketing, the telephone business was getting immensely popular, becoming a necessity across the states. This meant a boon for AT&T.

The rates for AT&T were becoming less affordable for the general public as new companies entered the market. Hence, the company revamped its pricing in response to the competitors’ low rates. 

Plus, it began acquiring small independent companies. AT&T already had a monopoly in long-distance landlines and refused to let others be a part of it. Strategic acquisitions in rural and urban communities furthered the gigantic network of the company.

Though the customer base of AT&T was large, the quality of service was deteriorating by the day. Its reputation was tainted, causing a drop in revenue.

How Did AT&T Regain Its Losing Market Share?

The financiers and bankers of the company decided to take action on the drying finances and service quality. 

In 1907, former president Theodore Vail was brought back by collective action from the bankers. It was he who steered the company around.

portrait of theodore newton vail

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First, discounted bonds were sold in huge numbers to AT&T’s shareholders. This increased shareholder trust and improved the public image.

Next, an entire Research and Development department was instituted with heavy funding to work independently and put AT&T back on track by innovating. This brainchild of Vail later transformed into the famous Bell Labs in 1925.

The prior management was more profit-oriented, and so quality was sidelined. The myopic strategies and incessant expansion had resulted in depleting customer trust. The new president had a long-term vision for AT&T to make it a nationwide network and give equal importance to service quality.

Vail was also a fierce visionary. He supported the monopolistic status of AT&T, striving to make it the sole provider of phone services in the US. Following this approach, AT&T started aggressively acquiring small phone companies. It also provided credit facilities to those in distress, later acquiring them as well. 

Key Takeaway 2: Sometimes slow and steady is better than fast

AT&T had an aggressive expansion strategy from the very beginning. But while it worked for the company initially when the competition was restricted due to patents, the change in circumstances demanded a different strategy altogether. Focusing on having a large network and higher revenues were just not enough.

Bringing Vail in for a reposition of AT&T’s goals was the saving grace of the company. The company now understood that while being fast might have gotten it ahead in the race, slow and steady while prioritizing quality over quantity would eventually ensure sustainable growth and enable it to win in the long-run. Therefore, investor confidence was restored, pricing strategies were revisited for consumer loyalty, and credit facilities were provided to smaller phone companies in order to enhance reputation and performance.

AT&T Changes Gears In The 20th Century

A major event took place in 1913 that resulted in AT&T divesting many companies. 

AT&T Divests After Government Action 

As the company was taking over companies and becoming a monopoly, antitrust actions by the government started. They culminated in the Kingsbury Commitment in 1913.

As a result of this agreement, AT&T sold many of the independents it had acquired in recent decades. It also had to sell its controlling interest in Western Union. The long-distance connections which were not accessible to any other operator were now accessible to all. 

Though at face value, it seemed that AT&T was no longer the main company in telecom, in reality, it was still pretty much a monopoly, which it would further strengthen in the coming decades. The majority of competitors were unable to snatch any market share, and most of the related equipment had to be bought from AT&T or its associated Bell Companies.

AT&T Nationalized and Re-Privatized

During the first World War, AT&T was nationalized for military purposes. It was privatized in 1919. Following its re-privatization, AT&T began growing explosively. Operating as a supervised monopoly, the company continued to expand its Bell System of companies. 

The company also ventured into space, launching its first satellite and even assisting the US government’s Space Program.

How Massive Did the Bell System Become?

AT&T achieved several accomplishments in the years to follow, empowering its Bell System.

The first coast-to-coast telephone call took place in 1915 on AT&T phones. Again, it was able to stand as the innovation bringer, strengthening its Bell System. The same year, the first-ever transatlantic message was delivered through AT&T.

By the 1920s, the company had over 60% share of national users of phones. A majority of the remaining subscribers were indirectly dependent on AT&T’s network through independents. As the radio came into the market, AT&T grabbed that opportunity as well, signing contracts with companies like General Electric. After the boom of radio, more than 15 radio stations were established in the states. 

The company began slashing the rates further as its customer base continued to increase. With a promising growth rate of new customers, it was reasonable to cut rates in return for customer acquisition. Investor credibility was at an all-time high. The shareholders had more than doubled in this decade.

The 1930s were spent recovering from the shocks of the Great Depression. However, AT&T came back stronger than before the Depression. By the end of the 30s, the company had become the largest corporation in the world in terms of assets.

AT&T had truly become a mammoth. More than 80% of US phone subscribers and 90% of long-distance line users were of AT&T. In fact, two-thirds of telephone equipment also came under its subsidiary, Western Electric.

Although a regulated sort of monopoly, the intertwined structure of AT&T was too hard to permeate. 

AT&T After The Second World War

As the second war approached, AT&T gained a significant advantage from military communication experience.

Post-war, the company began increasing rates. As the market had become too big, and the regulation subsided, AT&T saw an opportunity to increase rates and return to pre-war financials.

AT&T made it possible for anyone to contact people in other cities without any operator, delivering a significant cost reduction to its customer base and yet another strength for its monopolistic Bell System. The first-ever cross-Atlantic telephone lines were laid by the company, marking a landmark in the history of landline connection.

In the following years, the demand for calls on a daily basis skyrocketed as the US economy prospered most notably by teens who were increasingly purchasing their own phones. When phones switched from shared lines to independent ones, more people gained access to services such as weather announcements, which meant additional income.

By the 60s, AT&T had well and truly become a household name.

AT&T’s Key Achievement: Venturing Into Space 

As technology advanced, AT&T geared up to move towards space for global telecommunications. 

The management realized that simply being a monopoly was not enough. Its R&D initiatives needed to be in line with the global telecom industry. For this purpose, Bellcom was established to serve as the base for AT&T’s future satellite operations. The newly formed entity also provided space communication to the US Space Program. Bell Labs proved crucial in R&D for the company. 

A hefty amount of 500 million was invested towards developing electronic equipment, a completely new thing in those days. AT&T deployed its first satellite called Telstar in 1962, a landmark development towards its expansion.

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The years to follow would bring fierce challenges both from the government and new market entrants.

Key Takeaway 3: Obsess Over Improving Your Product & Results Will Follow

AT&T’s strategies following the divestiture and its reprivatization indicated one thing: Innovation. The management realized that depending on others to accelerate their growth was short-sighted. While patents, purchase of smaller companies, and gaining monopolistic power would give them control, gaining the confidence of investors and consumers required focusing on what made them different - their product. 

In the years to follow, AT&T innovated. Coast-to-Coast communication was made possible, radio channels acquired and initiated, satellites launched, and even cross-Atlantic telephone calls made possible without the need of an operator. 

Naturally, no other company was able to achieve the same feat, making AT&T a frontrunner in the telecommunications industry.

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Late 20th Century: A Tumultuous Period For AT&T Courtesy Restructuring and Tough Competition

As in earlier decades, AT&T would continue to face antimonopoly actions by the government. Only this time, significant restructuring had to take place – there was just no other way around it.

The challenge became two-folded as new competitors began entering the market. AT&T responded by diversifying and entering the consumer electronics market.

AT&T Faces Competitors Head-on

Slowly, new companies began penetrating the market.

Several businesses started attempting to take over various areas of AT&T's operations in the 60s. An accessory that suppressed background noise was offered by The Hush-a-Phone. To provide a private line connection between two major cities in the US, another company called Microwave Communications Inc. invested heavily. 

AT&T responded by introducing a new rate scheme for its subscribers and special discounts for new ones. Though the company was planning strategically against competitors, the Bell System was pretty much intact, meaning AT&T was still ruling the telecom sector.

This system came to an end in 1982 when the government intervened to break the monopolistic structure of the empire.

The Breakup of The Bell System 

With assets worth more than 155 billion, AT&T had become the biggest corporation in the world. However, the path onward was to be challenging, as the Bell system breakup would initiate a chain of problems for the company. 

In 1982, on the orders of the Department of Justice, AT&T decided to sell a list of its businesses to divest itself. The aim was to end AT&T’s monopolistic nature and create fair ground for competitors. 

AT&T was divided into regional companies. It was also prohibited from using the Bell name. The workforce was reduced by more than 60%, and overall net profit by 50%.

The two main divisions of the new AT&T were AT&T Communications, which handled long-distance service, and AT&T Technologies, a collection of smaller firms that focused primarily on producing and marketing telecommunications equipment for both consumers and corporations. 

AT&T Technologies split up and absorbed Western Electric. The new AT&T was anticipated to make the majority of its new revenue from long-distance, but the unregulated technologies group was anticipated to grow. Initially, AT&T Technologies focused on switching and transmission systems. In that market, AT&T was falling behind rivals and needed to make up ground.

As the breakup shook the entire company, its management had to respond effectively.

How Did AT&T Respond To The Breakup? 

The management of AT&T had a humongous task at hand. Its decades-old monopoly was finally untangled, which was its main strength. 

Now the company had two opportunities. Bells Labs were still under AT&T, which could serve as its innovation powerhouse. Secondly, after the breakup, the company could finally venture into the computer market, an industry it was prohibited under prior antitrust suits.

The management looked towards Bell Labs to innovate for decades to come. The telecom sector was rapidly growing and AT&T wanted to stay the leader in innovation. Hence, R&D funding increased exponentially.

Its new operating system, Unix, though possessing unique features, was not welcomed by the public as it was less user-friendly than other systems in the market. Whereas the management had predicted it to become the industry standard in operating systems. Resultantly, AT&T Computers reported a loss of more than a billion in 1986. 

However, things finally started to change towards the 90s. Foreign investments by the company began reaping benefits. More than 20% of its revenue now came from foreign sales. 

In 1991, AT&T acquired a major computer company, NCR Corp, to expand its computer business. AT&T stocks began to rise. The strategic acquisition of NCR opened new horizons for the company. 

Two years later, McCaw Cellular was purchased for 12 billion. This acquisition was made to strengthen its position in cellular systems. Though AT&T was still the giant in the market, McCaw boasted one-third of the market share. The acquisition further enhanced AT&T’s customer base. 

Key Takeaway 4: Iterate Your Strategy And Adapt To Business Scenarios

If there is anything that shines throughout AT&T’s rollercoaster ride of a journey, it is the act of adapting to changing industry situations, and not giving up despite the consequences. 

When the anti-monopolization antics pinned them down, the company’s management decided to make the best of its circumstances by searching for the silver lining. They could diversify into the computer market now, an act not possible prior to this. While their first try - the Unix - did not garner the acclaim they thought it would, they remained steadfast, changed gears, and made acquisitions to strengthen themselves in this new domain. 

Similarly, when competition threatened with innovations like the Hush-a-Phone, AT&T leveraged its customer loyalty to remain on top with revamped pricing strategies. While the company couldn’t compete on innovation here, it did so with lesser pricing; a strategy that worked wonders for them by yielding desired results.

AT&T Reinvents Itself In The 21st Century Through Acquisition Strategy

With AT&T’s Bell system finally disintegrated, the giant had to divest and restructure. 

Onwards, the strategy was centered around acquiring wireless communication companies and snatching up market share. AT&T was the first company to provide 5G in the US.

AT&T Repositions Itself

In 1995, AT&T divided itself into three companies. One was the main AT&T corporation, the second one AT&T Wireless, and Bell Labs.

This repositioning was meant to shift focus towards technological advancements in the telecom sector. With improving long-distance connectivity globally, AT&T wanted to stay the primary company in the USA's telecom domain.

AT&T purchased the cable television giant TCI in 1996. The same year, local landline carriers were acquired, including the big Teleport Communications Group, in an attempt to permeate the local markets and become a household name.

What Was AT&T’s Business Strategy After the Bell System Ended?

The newly inducted CEO, Michael Armstrong, embarked on laying a stronghold of AT&T in wireless communication and internet services. However, the following decade was marred by the constant change in AT&T's positioning in the market.

In a deal worth 60 billion, another cable provider MediaOne was acquired, hence establishing a strong market share in the cable television market. However, this required massive investments in the cable system to have it ready for speedy internet services. Later, the focus would shift to just two segments, consumer services and businesses.

The years to follow would include a series of acquisitions to expand into the wireless market. The company was trying to regain a similar monopolistic structure as in the prior decades, this time in the wireless communication and internet market.

In 2005, AT&T was acquired by Southwestern Bell Corporation (SBC). SBC was one of the companies formed after the Bell system had broken up. The next year, another Bell company, BellSouth was acquired. In 2007, the cellular company, Cellular One was acquired. The next year, Wayport was acquired, a major internet hotspot provider. With this acquisition, AT&T had the largest number of hotspots in the US.

How AT&T’s Digital Transformation Helped It Grow?

As the world advanced rapidly in telecom technology, AT&T knew it had to digitize its operations sooner rather than later.

After a series of acquisitions, AT&T was left with scattered data and unconsolidated systems. This was causing chaos for AT&T to manage the new acquisitions efficiently. Not only were operating costs surging, but there was mounting pressure to stay ahead with new technologies like 4G and, later, 5G.

First, the ERP and legacy applications were significantly reduced in an attempt to consolidate the overall operations. Next, big data was utilized to bring changes. With consolidated applications and data, AT&T could now analyze each area with precision to make relevant changes.

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The digital transformation helped AT&T reduce its operating costs and automate several levels of functions. 

Digitization also assisted in being the first 5G mobile provider in the US in 2018. 

In 2021, it was the first company to provide 5G, starting in 12 cities. This is attributable to its 5G Innovation Studio.

Key Takeaway 5: Locate Emerging Technological Trends To Gain A Competitive Edge 

AT&T’s story might have begun with Graham Bell, but eventually, the pace of technology growth meant the company had to catch up - fast. Their original prowess of telephonic conversations, trans-Atlantic calling, and radios was not enough.

Realizing this, the company made the smart decision of formalizing a digitization strategy. As the Bell company went down, AT&T remained afloat (and soared) with its newest acquisitions. 

Witnessing the growth in media tech, it acquired cable divisions. Realizing that phones were used for more than calling now, it invested in Hotspot providers, and eventually became the first company to introduce 5G to the United States.

AT&T made technological and digital innovation its foremost priority to become future-ready and set itself up for success.

Why Is AT&T So Successful?

Having acquired telecom giants in the 21st century and debuted 5G in the US, AT&T is undoubtedly the telecom market leader in the US and a giant in the global market. It has indeed come a long way from just a telephone company set up as an extension of the Bell companies. 

What Is AT&T’s Mission and Vision?

AT&T aims to become the best broadband provider in the US by providing high-quality broadband to businesses and consumers. By owning and operating both fiber and wireless network, AT&T's strives to achieve economies of scale and be a great connectivity company.

What Are AT&T’s Core Values?

AT&T emphasizes customer value and innovation in its values. Its six core values are:

  • Live true (customer comes first)
  • Think big (be the leader in innovation)
  • Pursue excellence (quality of service over profit)
  • Be there (engage in CSR)
  • Stand for equality (inclusivity at AT&T)
  • Make a difference (help workers and customers at large)

Who Owns AT&T Today?

AT&T operates as a holding company with a range of subsidiaries and affiliates. It is owned by institutional investors and individual shareholders. 

Among institutional investors, Vanguard Group Inc. owns 8.4%, BlackRock owns 6.9%, and State Street owns 4.2% of AT&T.

Among individual shareholders, the three leading Randall L. Stephenson, John J. Stephens, William A. Blasé with 0.02%, 0.01%, and 0.01% of the company’s outstanding shares, respectively. 

AT&T’s Growth by Numbers 

Statistic

2021

2010

Revenue

$168.8 billion

$124.2 billion

Net Income

$21.4 billion

$20.1 billion

Stock Price

$18.57

$22.04

Number of Employees

203,000 (the largest employer in the telecom sector)

266,590

Strategic Takeaways From AT&T’s Journey

Takeaway 1: Be quick to act when opportunities arise

As said in the business world, time is money. When you lose one, you lose out on the other too.

AT&T’s journey was a series of right opportunities grasped at the right time and transformed into money-making machines. It entered the telecom industry when it identified an unattended niche and took the opportunity to become its sole provider by immediately patenting its tech. With climatic change and something as drastic as a blizzard, AT&T recognized the opportunity to expand networks within and make its mark. When the company’s venture into the computer industry was not-so-successful, it jumped at the chance to acquire NCR corp. And more recently, when AT&T realized the importance of the internet for this modern world, it took the first step to usher in a new era - of 5G - before anyone else grasped the opportunity. 

Takeaway 2: Build positive relationships with stakeholders

Leading a business to success is a two-way street. While AT&T’s management created strategies and led out plans to achieve its own KPIs, it realized very early on (with Vail’s help) that focus on the business was not enough for success. The company had to keep its investors and clientele happy. Therefore, with any restructuring or new strategization, emphasis was laid on stakeholder benefits. Pricing was made more affordable in the face of low, competitive rates, credit schemes were rolled out to smaller telecom operators, and change was welcomed when the world moved to digitization. This kept AT&T updated and its stakeholders satisfied. 

Takeaway 3: Look for the silver lining in difficult business scenarios.

AT&T had seen it all through its years. Divestiture, break up, nationalization, reprivatization, you name it. However, instead of succumbing to difficult circumstances, the business rose to the challenge headfirst. When its patents expired, it turned to innovation to make its product stand out. When it was divided into two, it entered the computer industry. When its first offering, Unix, didn’t work, it enlisted the help of NCR corp via acquisition. When its original Bell invention was no longer in hype, it turned to digitization to enter the internet and media industry. Adapting to challenges resulted in AT&T diversifying into domains that would turn out to be successful in the future.

Takeaway 4: Prioritize innovation and growth above all.

The future is digital and tech. AT&T realized it at the very beginning. While the world was making operator-assisted calls, it strived towards coast-to-coast calling, cross-Atlantic phones, and satellite launches and stood out. When cable had just entered the scene, the company signed contracts with mega companies like GE to incentivize radio channels. In the time when the internet had entered the scene and the world was equipping itself to deal with 4G, AT&T went ahead to introduce the future - 5G. The company proved that innovation was not only key, it was a necessity to stay ahead of the competition. 

AT&T is the #1 telecommunication company globally and the market leader in the US. Far from smooth, its journey began with the invention of the telephone, then moved towards a monopolistic giant only to be disintegrated eventually. From that point on, AT&T began a series of divestitures and focused on securing market share in the internet business. Today, AT&T is the pioneer of 5G services in the US and continues to innovate in mobile communication.

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