AT&T Case study Essay

1. Review AT&Ts past m angiotensin-converting enzymetary policies and backing choices. Were these appropriate for the nature of the business?AT&T Corp., one of the largest companies in the United States, has had a vast and storied history. Initially, AT&T operated as a monopoly, but in 1982, Justice Department, broke up the partnership into individual companies. Prior to divesture (in 1981), AT&T was the largest private company in the world and despite many challenges, AT&T remained an prototypic 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 monetary indicators.Revenues and operating requital increased 12% and 6% respectively comparing to year 1981. In ten years, the company raised its revenues, net income, cash and assets more than 2 times. Its worth to mention that AT&T was fitted to edit out 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 cancel lead nor lowered dividends, and only increased dividend per share 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 stable, reliable and remunerative companies in the world by 1982.2. In what fundamental ways leave AT&Ts business change in the approximate future?Throughout most of the 20th century, AT&T held a monopoly on phone service in the United States. In 1982, with an agreement between AT&T and the U.S. Department of Justice, AT&T agreed to divest itself of its local telephone operations but go along some of its businesses. The principal provision of the antitrust settlement was that the corporation would be split into seven completely independent regional corporations. Each regional company would continue to provide local telephone and other telecommunication services in addition to ability to sell telephone equipment. The rest or naked as a jaybird AT&T would focus on long distance, R&D and manufacturing arms.3. In view of AT&Ts changing strategic and economic purlieu, what debt policy would you recommend? What other financial policies are appropriate for the new AT&T? What are presumable to be the consequences of these financial policies?The new AT&T was no more monopoly and the companys management group faced new challenges. startle of all, I think 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 effective actions needed to be taken to beat off animated competition. Moreover, there were several serious questions about future profitability of the new AT&T divisions (especially Western Electric) and it was not clear whether the y would be able finance their operations in competitive markets. Taking into consideration in a higher place 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 dodging to reach more diversified portfolio and to broaden the companys stove in other areas.