REVIEW OF TELECOM INDUSTRY: Verizon, AT&T and T-Mobile
Dr. Tanvir Orakzai
June 29, 2006
Telecom industry is the building block of any nation in today’s world. Wireless communication is becoming more widespread than the traditional communication. According to the US Wireless Communication Association, 3.6 million jobs directly or indirectly dependent on the US wireless telecommunications industry. In 2004, it generated $118 billion in revenues and contributed $92 billion to the US GDP .Even though the wireless industry is today smaller than the computer and automobile industries, in the next five years time; it is expected to take over these industries.
I) Verizon Wireless
Verizon Wireless owns and operates majority of US wireless network. It is a joint venture of Verizon Communications and Vodafone headquartered in NJ, Verizon. Verizon wireless deals in wireless voice and data services. Verizon has built the nation’s first wide-area wireless broadband network and it also delivered the nation’s first wireless consumer 3 G-multimedia services. It has a broad consumer base. The company generated about US$ 75.11 billion in 2005 in net revenue, with revenue net per share of 27.155. The company quarterly growth is healthy and increased by 5.8 percent in 2005 as it increased its gross profit by 49.64 percent.
II) AT&T
An AT &T Wireless service was the third largest wireless telephone carrier US. In October 2004, AT&T wireless completed its merger with Cingular to become the largest wireless carrier in the United States. Under the agreement, only the Cingular brand would survive. On November 16, 2004, every single AT&T Wireless store was re-christened under the Cingular banner. It is now renamed as AT&T Inc. The company is based in San Antonio, Texas and formed recently in 2005 by SBC Communications. The company net revenue for year 2005 reached $43.86 billion, with revenue per share 13.023, while the quarterly growth in 2005 remained 26 percent. The company total gross profit reached $24.67 billion. The total operating cash remained at $12.66 billion.
III) T-Mobile
T-Mobile is group of mobile phone corporate subsidiaries (under the ownership of Deutsche Telekom), which operates major GMS networks in Europe and US. T-Mobile has about 109 million subscribers, which makes it the world’s 3rd largest mobile phone service provider. T-mobile is present in eight European countries (Austria, Croatia, Czech Republic, Germany, Hungary, Great Britain, Netherlands, and Slovakia) and USA.
T-Mobile USA is the fourth-largest wireless carrier in the U.S. market with 21.7 million customers. In 2004, T-Mobile was able to generate revenue of $9366 million with a growth rate of 12 percent a year.
According to Porters’ model, a business strategy needs to be aligned with the increasing opportunities and threats especially, competitive strategy, which is in constant flux. The Five vital Competitive Forces establish the strength of competition increasing the productivity of the industry. He explains that businesses strategy needs to be adapted in such a way, that these (competitive) forces enhance the productivity of the organization.
US wireless services industry generated $118 billion of value add in 2004 with $92 billion in additional GDP in 2004.
The mergers Bell Atlantic and GTE were among the largest mergers in United States business history, culminating in a definitive merger agreement. Again in 2005, Verizon agreed to acquire MCI, known as WorldCom, especially when it saw SBC Communications to acquire AT&T just a few weeks earlier. The impact of these mergers was two fold: to create a barrier for the smaller companies and making Verizon a stronger player in the market. The recent acquisition would also increase, Verizon economy helping it to achieve great productivity by slashing down thousands of jobs.
AT&T was able to maintain monopoly for decades and it kept on buying competitors, which resulted in making it the sole company in US for a very long time. However, it invested little money in research and innovation, which enabled the competitors to take benefits of cheap microwave communications breaking its monopoly. In recent years, AT&T like other corporation has been involved in merging and forming alliance to create barrier for competitors, but it was less than successful, its merger with Cingular made AT&T Wireless, a company which is spearheading the Cingular rather than AT&T.
Being a small carrier, T-Mobile USA tends to compete on price, and advertises heavily to the youth market. It also operates hotspot locations providing Wi-Fi Internet access at café, airport and airports etc. It is also sponsoring many youth or sports related events to create brand awareness among the younger generation, thus penetrating the market through its brand image like Samsung.
For decades AT&T bought over small rivals and held monopoly, yet competitors overcame this barrier with substitutes in 1970s. The mistake AT&T committed was not to invest in research and development, the rivals found their way through substitute and cheaper products. Verizon had the money; it invested in buying over the rival rather than spending more money in competition. T-Mobile is aware of its status in the US market, instead of direct marketing; it is emphasizing more on brand creation and focusing on the younger segment in the market. The telecom companies are in constant competition using different techniques and strategies. In all of these three cases, merger is the main area, which is used as a main tool to either acquire the competitors, which shows that in the business world, there is only one thing certain-competition.
I) Verizon Wireless
Verizon Wireless owns and operates majority of US wireless network. It is a joint venture of Verizon Communications and Vodafone headquartered in NJ, Verizon. Verizon wireless deals in wireless voice and data services. Verizon has built the nation’s first wide-area wireless broadband network and it also delivered the nation’s first wireless consumer 3 G-multimedia services. It has a broad consumer base. The company generated about US$ 75.11 billion in 2005 in net revenue, with revenue net per share of 27.155. The company quarterly growth is healthy and increased by 5.8 percent in 2005 as it increased its gross profit by 49.64 percent.
II) AT&T
An AT &T Wireless service was the third largest wireless telephone carrier US. In October 2004, AT&T wireless completed its merger with Cingular to become the largest wireless carrier in the United States. Under the agreement, only the Cingular brand would survive. On November 16, 2004, every single AT&T Wireless store was re-christened under the Cingular banner. It is now renamed as AT&T Inc. The company is based in San Antonio, Texas and formed recently in 2005 by SBC Communications. The company net revenue for year 2005 reached $43.86 billion, with revenue per share 13.023, while the quarterly growth in 2005 remained 26 percent. The company total gross profit reached $24.67 billion. The total operating cash remained at $12.66 billion.
III) T-Mobile
T-Mobile is group of mobile phone corporate subsidiaries (under the ownership of Deutsche Telekom), which operates major GMS networks in Europe and US. T-Mobile has about 109 million subscribers, which makes it the world’s 3rd largest mobile phone service provider. T-mobile is present in eight European countries (Austria, Croatia, Czech Republic, Germany, Hungary, Great Britain, Netherlands, and Slovakia) and USA.
T-Mobile USA is the fourth-largest wireless carrier in the U.S. market with 21.7 million customers. In 2004, T-Mobile was able to generate revenue of $9366 million with a growth rate of 12 percent a year.
According to Porters’ model, a business strategy needs to be aligned with the increasing opportunities and threats especially, competitive strategy, which is in constant flux. The Five vital Competitive Forces establish the strength of competition increasing the productivity of the industry. He explains that businesses strategy needs to be adapted in such a way, that these (competitive) forces enhance the productivity of the organization.
US wireless services industry generated $118 billion of value add in 2004 with $92 billion in additional GDP in 2004.
The mergers Bell Atlantic and GTE were among the largest mergers in United States business history, culminating in a definitive merger agreement. Again in 2005, Verizon agreed to acquire MCI, known as WorldCom, especially when it saw SBC Communications to acquire AT&T just a few weeks earlier. The impact of these mergers was two fold: to create a barrier for the smaller companies and making Verizon a stronger player in the market. The recent acquisition would also increase, Verizon economy helping it to achieve great productivity by slashing down thousands of jobs.
AT&T was able to maintain monopoly for decades and it kept on buying competitors, which resulted in making it the sole company in US for a very long time. However, it invested little money in research and innovation, which enabled the competitors to take benefits of cheap microwave communications breaking its monopoly. In recent years, AT&T like other corporation has been involved in merging and forming alliance to create barrier for competitors, but it was less than successful, its merger with Cingular made AT&T Wireless, a company which is spearheading the Cingular rather than AT&T.
Being a small carrier, T-Mobile USA tends to compete on price, and advertises heavily to the youth market. It also operates hotspot locations providing Wi-Fi Internet access at café, airport and airports etc. It is also sponsoring many youth or sports related events to create brand awareness among the younger generation, thus penetrating the market through its brand image like Samsung.
For decades AT&T bought over small rivals and held monopoly, yet competitors overcame this barrier with substitutes in 1970s. The mistake AT&T committed was not to invest in research and development, the rivals found their way through substitute and cheaper products. Verizon had the money; it invested in buying over the rival rather than spending more money in competition. T-Mobile is aware of its status in the US market, instead of direct marketing; it is emphasizing more on brand creation and focusing on the younger segment in the market. The telecom companies are in constant competition using different techniques and strategies. In all of these three cases, merger is the main area, which is used as a main tool to either acquire the competitors, which shows that in the business world, there is only one thing certain-competition.