The story of AT&T goes hand in hand with the rise of mass communication in the U.S. From its foundations in the invention of the telephone to its monopolistic practices over the large part of the 20th century, all the way to its place today as one of the most prominent players within telecommunications in the world, the company has evolved in conjunction with the evolution of modern America.
How Was AT&T Founded?
AT&T (T) - Get Report began as the “Bell Telephone Company” after Alexander Graham Bell invented the telephone in 1876. A year later, Bell formed the Bell Telephone Co. with his partners. Through the next few years, the company was the National Bell Telephone Co, before once again changing its name to American Bell Telephone Co. By 1882, American Bell had grown enough to acquire a controlling interest in Western Electric, an asset of Western Union (WU) - Get Report at the time.
In 1885, the American Telephone and Telegraph Co. was incorporated by American Bell. This is where we first see the “AT&T” name come into play. The subsidiary was used to build out the telephone network that first began in New York.
The company proceeded to grow immensely before running into its first antitrust attack in 1913. Known as the Kingsbury Commitment, the company reached a settlement with the Justice Department by divesting Western Union, while also granting other telephone companies the ability to access AT&T’s network. The deal also entailed that AT&T would require government approval before it bought out competitors. Because of its sheer scale, and control of the telephone grid, one could argue that this deal helped bolster AT&T as a monopoly.
The company was once again pursued by the government in 1949 because it owned the only supplier of phones that could operate with their network. The company was called Western Electric, and it rented phones out to customers. Once again, a settlement was met wherein AT&T gave up its control of Western Electric.
By the 1980s the telephone company couldn’t hold off the government any longer. A suit by the Justice Department that actually began in 1974 ended in 1982 with the breaking up of the company's business. In the end, AT&T would become seven different companies. The firm managed to hold onto its long-distance business, and the monopoly came apart in 1984.
The ultimate controversy of AT&T has always been its structural scale within the market. The company has seemingly always progressed well at gaining market share. Fast forward to more recent years, and irony really takes over the story. After struggling for years, a former piece of the monopoly, SBC Communications (you may remember it as Southwestern Bell), acquired AT&T in 2005 for $16 billion. Adopting the more time-honored name, AT&T was once again on the map as one of the top dogs.
Since, the focus of the business has been different. The advent of the internet and cell phones changed the game forever. We’ve watched the new AT&T make multiple acquisitions through the past decade and a half, including Cingular Wireless, BellSouth, Cricket, and eventually DirecTV. The merit of that last acquisition has been in question. Now with business segments in traditional phone, wireless, and television, AT&T is a powerhouse within the modern era of media.
Recent Moves and Stock Performance
In many ways, AT&T has seemingly returned to the same trend of acquisitions and market control that gained it such criticism in the past. In 2011 the company was blocked from buying T-Mobile (TMUS) - Get Report. Great grief was also stirred up over its successful acquisition of Time Warner for $85 billion. With the deal, the company gained control of a massive host of media assets. These include CNN, HBO, all of the Warner Bros. assets, and many others. The deal was fought tooth and nail by the Justice Department.
A few years later, we saw the acquisition of DirecTV for $49 billion. The deal has been a bit lackluster, as the satellite TV provider has struggled to grow its subscriber base in an ever-evolving media landscape. How the company will handle this tough market remains to be seen.
These deals have created many liabilities for AT&T, now carrying $173.5 billion in long term debt on the balance sheet. Regardless of these debts, AT&T maintains an excellent dividend yield of 5.43%. The catch over the last few years has been a stock price that has underperformed the broader market; gaining a mere 12% over the past five years. Still though, it is tough to bow out of a company that has positioned itself for a place within streaming. Future performance will likely be based around how the company reworks DirectTV, and whether it can use HBO as a platform for really making a mark in the streaming wars.