AT&T Case study Essay

1. Review AT& adenylic acidTs past monetary policies and financial support choices. Were these appropriate for the nature of the avocation?AT&T Corp., one of the largest companies in the United States, has had a long and storied history. Initially, AT&T operated as a monopoly, but in 1982, Justice Department, broke up the federation into one-on-one companies. Prior to divesture (in 1981), AT&T was the largest private company in the world 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 safety and dividend income and numbers from exhibit 1speak for themselves. By 1982 the company increased all its key financial indicators.Revenues and operating pay increased 12% and 6% respectively comparing to year 1981. In ten years, the company raised its revenues, net income, cash and assets more(prenominal) than 2 times. Its worth to ment ion that AT&T was adapted to reduce its total outstanding debt by $ 725 mil and at year-end, the companys debt ratio stood 42.3% down from 46.7% in 1980. In addition, AT&T neither cancelled nor lowered dividends, and only increased dividend per role 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 st fit, reliable and profitable companies in the world by 1982.2. In what fundamental ways will AT&Ts business change in the near future?Throughout to the highest degree of the 20th century, AT&T held a monopoly on earphone service in the United States. In 1982, through an agreement among AT&T and the U.S. Department of Justice, AT&T agreed to divest itself of its local telephone operations but hold up some of its businesses. The principal provision of the antitrust settlement was that the corporation would be split into seven completely indep endent regional corporations. Each regional company would continue to provide local telephone and other telecom services in addition to ability to sell telephone equipment. The be or pertly AT&T would focus on long distance, R&D and manufacturing arms.3. In view of AT&Ts changing strategic and economic environment, what debt indemnity would you recommend? What other financial policies are appropriate for the new AT&T? What are likely to be the consequences of these financial policies?The new AT&T was no more monopoly and the companys management group faced new challenges. First of all, I call back that when AT&T was monopoly, managers were averse to risk and led more financially conservative policy. After divestiture, it was clear that the external environment changed and good 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 W estern Electric) and it was not clear whether they would be able finance their operations in competitive markets. Taking into consideration supra stated facts, at that phase I would recommend to shift gears from debt financing and switch toward equity financing.In addition to the change in financial policy, I would also recommend considering a new acquisition scheme to reach more diversified portfolio and to broaden the companys range of a function in other areas.