Stratégie AT & T

Introduction

It was much easier to find information about Vodafone’s strategy than on AT&T’s. This indicates that Vodafone is more transparent and precise with its stakeholders when it comes to the communication of their strategy through its annual reports and additional documents.

Vodafone is mainly strong in the European market and has a strong international presence in B2C markets. Whereas AT&T’s main market is its home country (US), followed by the B2B activities in the EMEA region (Europe, Middle East, Africa) which represent 60% of AT&T’s sales to international businesses outside the US. However, Vodafone presence in the US is minor as it has exited the wireless US market when it sold its interest in Verizon Wireless in February 2014. They are both strong in the European market, Vodafone especially in the B2C market and AT&T solely in the B2B sector.

Question 1: 1. What are the strategic and organizational issues facing the companies of your choice?

AT&T strategy is to follow its customers overseas and is looking to international expansion, so AT&T had to adopt a specific strategy to enter, survive and thrive in the European market. AT&T was a new entrant in the European market, it had to share small national markets with competitors; so it could never achieve the same position of strength and dominance as it has in the US where it is the national champion. Nowadays, “the largest region for AT&T” outside of the US is EMEA (Europe, Middle East, Africa), where they are active in the B2B market (Corp.att.com, 2014). However, from the beginning of 2013, there were talks of AT&T Inc. willing to enter the European market in B2C due to a lack of expansion opportunities in their home market (Buchan, 2013).

Indeed, AT&T is looking to international expansion as it prepares for stiffer competition in its home country. (Bloomberg 2013)

AT&T and the U.S. mobile carriers in general are increasingly facing the problem of limited growth in the number of subscribers, as there is hardly any one left who needs a mobile phone and doesn't have one.

The situation is so drastic that the carriers are even ready to compromise their revenues by cutting their price to gain and more importantly retain their existing subscribers. (Gupta V. 2014)

But why would AT&T leave a lightly regulated, moderately competitive market like the US and come into one of the most competitive and regulated markets in the world?

Nonetheless, AT&T Inc. has recently backed down from entering European markets. Their interest is fading, as “doing business in the region is costly, complicated and highly regulated” (Thomson, 2013).

In 2014 AT&T ruled out an offer for Vodafone. Vodafone's poor performance in Europe may be the reason why AT&T is more careful in acquiring Vodafone in the near future.

Q3 2014 Q3 2013 Trend

Germany -7.9% -0.2% -7.7%

Italy -16.6% -13.8% -2.8%

UK -5.1% -5.2% +0.1%

Spain -14.1% -11.3% -2.8%

Source: Vodafone's Q3 2014 and Q3 2013 earnings report

Vodafone's third quarter earnings show an alarming negative image in Europe. Service revenue decreased by 7.9%, driven by intense price competition in both consumer and enterprise segments and an MTR cut effective from December 2012.

However, the revenue growth in Asia and Africa was by far not enough to cover for the lost revenue in Europe. Overall, Vodafone's organic revenue decreased by 4.3% in the third quarter of this fiscal year.

AT&T is looking for an acquisition target in Europe. Vodafone is one of the three possible targets, together with Orange and some of Telefonica's European assets. However, AT&T's board first needs to convince shareholders to enter the highly competitive market in Europe. (2014 Pim Keulen)

As an alternative to Vodafone, EE -- Orange’s joint venture with Deutsche Telekom AG in the U.K -- could be used as a platform for further acquisitions in Europe. However, that plan would be hampered by the lack of an obvious target in Germany, the region’s biggest economy.

The mobile communications market in Europe is hidebound, rule-bound and stuck in its ways. Even though AT&T has now dismissed the idea of taking over the British firm Vodafone, many industry gossips still feel that AT&T is still mulling some kind of European invasion in the future.

One of the reason why is that Europe has been notoriously slow to take up 4G mobile broadband, there could be a huge potential windfall for any firm which can persuade the Continent to upgrade from hoary old 3G. At the end of 2013, AT&T’s CEO Randall Stephenson said Europe was an “incredibly exciting” market filled with “huge opportunity”, particularly because its take up of 4G mobile broadband has been so sluggish. It seems unlikely that AT&T would go to all that effort if it had no interest in Europe.

Akhil Dattani of JP Morgan stated that it depends on whether Eurocrats allow the merger of Telefonica Deutschland and E-Plus to go ahead. If this scheme is given the green light, it could open the way for AT&T to begin building a pan-European network.

If Stephenson is actually thinking about getting involved in Europe, he will be hoping that customers decide to belatedly begin using 4G. Seeing as the mobile penetration rate in Europe is the highest in the world, with about 80% of the population owning a smartphone, a mass shift to 4G would be extremely lucrative. Best of all, this looks almost inevitable, particularly if the European economy starts to recover.

(Forbes 2014)

Over time the telecommunication giant Vodafone has expanded into different parts of the globe including, Belgium, France, Greece, Germany, Italy, France, Romania, USA, Egypt, Kenya and South Africa to mention a few. (Vodafone.com, 2009) Vodafone's early success has been attributed to its usage of key niche strategies and first mover advantages regarding location economies. This helps gain market share which leads to economies of scale and earning curve advantages through the utilization of its core competencies in foreign markets. (Anwar, 2003; Pan et al, 1999)

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