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Contemporary Business

In: Business and Management

Submitted By ucallians03
Words 3089
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Assignment 5: Financial Management
BUS 508 - Contemporary Business
Summer Quarter 2012

Introduction
In contemporary business within the technology industry, the digital technology age has grown into one of the most profitable industries, especially centered on telecommunication. The United States of America is one of the most technologically advanced countries in the world. The United States mobile market continued to grow and updates its quality and service to the customer. T mobile and AT & T are the top two successful mobile companies that provide telecommunication service to the users. In the following paper will analyze how the company attempt to make profit from rising consumer demand after the crash. It will evaluate the change in consumer demand trends after the crash for T mobile and AT &T. The paper will discuss at least two strategies that multinational corporations can undertake in order to make profit by leveraging the growing consumer demand.

Companies that attempted to make profit from rising consumer demand after the crash. How they attempted to make a profit after the crash and discuss any unethical practices. T-Mobile USA and AT&T provide mobile wireless communication services. The Companies offer wireless services including digital voice, messaging, and high-speed wireless data services, as well as phones and accessories. The companies serve customers throughout the United States. T-Mobile USA, Inc. is a global marketing-information-services firm, ranked the company highest among major wireless carriers for retail-store satisfaction four years consecutively and highest for wireless customer care for the past two years consecutively.
Deutsche Telekom Case Study (2012) discusses that T-Mobile USA, Inc. which operates as the U.S. operating entity of T-Mobile International AG, the mobile-communications holding company and subsidiary of Deutsche Telekom. Currently, T-Mobile serves approximately 33.7 million mobile customers across the United States of America. It is the fourth largest network in the country. The company offers different services including contract, prepaid, roaming AT &T provides similar service with T-Mobile. AT&T is the largest wireless operator by subscribers in the US, the company agreed to purchase T-Mobile for $39 billion from the founder of the company. In December 2011, AT&T declared that it was not going to peruse the bid to acquire T-Mobile USA as a result of vociferous objections from consumer groups and the US Government. For example, I was very upset that T-Mobile USA was going to merge with AT&T, because I have been with T-Mobile for over 5 years and it is my favorite provider. They provide great customer service and variety of products.
In July 2002, voice stream was rebranded as T-Mobile USA, a brand that has become very successful and trusted in the USA. It is run as separate entity to Deutsche Telecom but is a wholly-owned subsidiary. At 2010, T-Mobile had as annual turnover in excess of $21 billion over 33 million costumers. Voice Stream was the result of the merger of General Cellular and Pacific North West Cellular in 1994. In 2006, T- Mobile gained 120 spectrum licenses covering the continental US, Hawaii, Puerto Rico, the US Virgin Islands, Alaska and major markets including New York City, Los Angeles and Chicago. This marked a major expansion of T-Mobile’s US operations and signaled its arrival as a major player in the US wireless telecommunications market.
T-Mobile recent Financial Performance at the end of Q112 is revenue of $5.161 billion, a decrease of 42% from Q111. Service revenue hit $4.630 billion. T-Mobile USA added 449,000 subscribers in Q112. Prepaid services fell by 162,000 in the year to March 2012. Contract subscribers, however, increased by 161,000. Blended ARPU was $46, consistent over the quarter.

Wireless Services
T-Mobile’s network operates over a GSM platform with a 3G upgrade launched in New York
City in May 2008. The company launched a UMTS network with rapid expansion taking place. When the company launched it in Washington DC in November 2008 it already had coverage of 120 major cities across its concession area. The company currently operates an upgraded to an HSPA+ network, which is 3.5G technology, although T-Mobile refers to it at 4G. By the end of 2011, this network will cover more than 200 million people. It is also focusing
Recent Financial Performance
In the quarter ending March 31 2012, AT&T reported revenue of $31.882 billion, up from
$31.247 billion in Q111. This growth was due to wireless, data and other services, while voice United States Telecommunications Report Q3 2012 and directory service revenues declined. Operating income was $6.1billion and operating expenses $25.72 billion. This was just over half of Q411’s, given the actuarial loss on benefit plans, directory asset impairments, and the break-up fee following the termination of the T-Mobile acquisition in Q411. The company added just 726,000 net additions in Q112, down from 2.5mn net subscribers in Q411. Just 187,000 subscribers were postpaid. Prepaid additions were 125,000. Wireless data revenue increased 29.7% y-o-y to US$6.12 billion. Wireline revenues were down 0.1% on Q111, total $14.93 billion.
Wireless Services
AT&T Mobility is the second largest mobile operator in the US, with more than 103.94mn wireless subscribers at the end of Q112, compared with about 97.5mn a year earlier. The operator reported a blended ARPU total of US$46.87 in Q112, down from US$48.15 in Q111.
Data ARPUs reached US$19.7 in Q112, up from US$17.62 a year earlier.
AT&T SWAT analysis:
Strengths
* The second largest mobile operator in the market backed by strong name. * Largest mobile, fixed-line and broadband operator in US. * Reclaimed position as largest mobile operator in Q112. * Good growth reported through acquisitions as well as organic growth. * Widespread deployment of its HSPA network. * Continued broadband growth helping to counter decline in fixed-line revenue.
Weaknesses
* Declining fixed-line market impacting revenue. * Delays in LTE rollout means AT&T did not benefit from first-mover advantage. * Focus on T-Mobile merger has led to missed opportunities in spectrum acquisition and partnerships that Verizon has benefited from. Opportunities * Planned upgrade of HSPA network should see download speeds up to 20Mbps helping to drive mobile data usage.
Threats
* Recession resulted in many subscribers decreasing their spending as credit got tighter – threatening the company’s revenue and margins. * Planned takeover of T-Mobile looking increasingly less likely, with blocks from FCC and Do J. * Imminent close-down of 2G network may mean loss of subscribers. Limited spectrum will cause increasing problems for service expansion.
T-Mobile SWAT Analysis:
Strength
* Backed by German owned Deutsche Telekom. * Possible merger with MetroPCS would provide the scale and resources to compete with its three national rivals.
Weaknesses
* Focuses on the youth market, who generally have lower incomes. * Latecomer to the 3G market only launching mid-2008 while rivals have had their networks running for some time. * Far behind rivals in terms of LTE development.
Opportunities
* Move to provide fixed-line services will help the operator become a multi-service provider. * Has sample spectrum to cater for increasing data demand, unlike many rivals. * T-Mobile revealed ambitious investment plans in Q112.
Threats
* Ongoing economic crisis is seeing subscribers tighten their belts, putting pressure on margins and making it difficult to encourage greater spending. * The failure of the AT&T deal impacted T-Mobile USA’s business strategy.
Evaluate the change in consumer demand trends after the crash for each of the tech stock companies you researched. Provide examples with your evaluation and use praphics such as charts, when applicable.

Verizon, AT&T and Sprint all enjoyed growth in prepaid subscribers in Q112, while T-Mobile reported a dramatic fall of 819,000 subscriber losses. In contrast, T-Mobile recorded the largest number of postpaid subscriber net additions, enjoying 1,268. As the I-Phone was not released on T-Mobile’s network, its postpaid net additions are less affected– all other operators reported muted growth in postpaid subscriptions that quarter, the result of the I-Phone upgrades of Q411, which means there are fewer subscribers left to upgrade in Q112.

Wireless Subscriber Mix (‘000)
March 2012 Source: BMI
The two companies have strong strength, weakness, opportunity, and threat, but they both manage to be on the top of the market. They experiment new products to provide a better service to the consumer. There has been no change in Industry Risk score, which measures the independence of regulator. Business Monitor International welcomed the investigation of new rules in March 2012 that would ensure mobile devices for use in the 700MHz band are interoperable in the networks of different carriers. This follows allegations that the US' largest carriers, Verizon and AT&T, are pressurizing manufacturers to produce devices, handsets, chips and network equipment that are only compatible on Verizon and AT&T spectrum. If enforced, interoperability would serve to level the mobile operator playing field, providing a boost to competition in the sector. AT&T reported the most disappointing results in Q112, adding just 693,000 new subscribers, down from 2.5 million in Q411.
The US is a large country in terms of geography and population, and as a result there are huge economies of scale in the telecoms sector, which strongly benefit the larger players. The two largest players dominate 58.5% of the market, the third and fourth largest, Sprint and T-Mobile, have around 26.7% with the smaller players around 16.1%
AT&T/T-Mobile Merger the dynamics would have changed so that 76% of the market was controlled by the top two players, but AT&T announced its decision to scrap its takeover of T-Mobile USA on December 19 2011. In the face of overwhelming opposition from the FCC and the Department of Justice, the company decided to abandon the $39 billion deal. AT&T paid a break-up fee of $3 billion and handed over a large package of spectrum to T-Mobile, which hit its Q411 results as a $4 billion accounting charge. Given this, Q411 proved a challenging quarter for both AT&T and T-Mobile USA.
The increase was driven by a 5.4% rise in the firm's wireless division revenue, which reached U$16.1bn in the quarter. Net income stood at $3.58 billion in Q112, up by more than 5% y-o-y. Despite this, AT&T lacks spectrum. It is already struggling to maintain service quality in the face of burgeoning demand for data and, as part of the breakup fee, needs to transfer additional spectrum to T-Mobile, which will aggravate its problems further The CEO, Randal Stephenson, hit out at regulators in relation to its spectrum policy. By not allowing the merger to pass, Stephenson said the regulator was holding back growth by not allowing sufficient capacity to cater for demand. However, three days following the block, the FCC approved the US$1.93bn spectrum deal with Qualcomm. AT&T will use this extra spectrum to increase mobile device speed, particularly for video and games. While BMI backs the decision not to allow the merger, we believe the FCC will need to auction additional spectrum soon in order for consumers to carry on enjoying adequate service. In March 2012, AT&T began informing subscribers in parts of New York that it will begin switching off parts of its legacy 2G mobile networks. After it failed to increase its high-capacity spectrum resources when its bid to acquire T-Mobile USA was rejected, AT&T is now looking to refarm its 2G spectrum to meet its immediate capacity requirements.
New technology would allow AT&T to satisfy the growing demand for data services. It has been progressively working to this plan since at least 2009 and reports suggest that most of its voice and data traffic are now carried over HSPA. The next step would appear to involve shutting down all, but the most essential elements of its 2G GSM infrastructure, while making the most of its PCS spectrum available to the HSPA platform and, potentially, also to the 4G LTE network the company is rolling out. This is a process that will still take several years to complete and AT&T will likely encounter resistance from consumers reluctant to give up their low-cost no-frills services in the meantime, even where it offers a free 3G handset as compensation. We therefore expect that the company will begin recording subscriber losses as disgruntled consumer and business users move to rival networks in protest. Beneficiaries from this movement, in the short term at least, will be Verizon Wireless and Sprint Nextel.
The company also operates one of the most extensive machine-to-machine (M2M) platforms in the US. After having recently spoken with a key AT&T executive on this topic, it is clear to BMI this is a business AT&T is keen to grow quickly over the next few years. Due to the comparatively low profit Unite margins associated with M2M services, we do not believe there would be much value to be gained from transitioning its low-cost GSM modules to 3G or even 4G in the short term. We therefore believe that a skeleton GSM network will remain operational for several years in order to maintain the M2M business, until such a time that 3G/4G M2M modules become more cost effective.
T-Mobile
Despite gaining spectrum as part of the breakup agreement, T-Mobile also has challenges ahead. Parent company Deutsche Telekom has revealed it aims for annual capex of around US$3 billion, Whereas BMI believes it requires a much higher level of investment in order to remain competitive in the US mobile market. In the medium term, the company will need to build and deploy an adequate LTE network capable of competing with rivals, which will require investment around three times this level. Further, its current W-CDMA 1700MHz and 2100MHz frequency network is not compatible with the I-Phone 4S. T-Mobile does not offer the handset in its plans, but offers the option of porting the I-Phones of customers who switch to the carrier. However, a leaked document on January 26 2012 revealed that the quality of service on this device to be of a poor standard, given the incompatibility of T-Mobile's network with the device. This will cause severe limitations to the company's potential to secure market share. After the collapse of the US$39bn sale to AT&T in early 2012 due to regulatory pressure, Deutsche
Telekom has been vigorously pursuing an increased return on capital in its US business. However, Deutsche Telekom has stated that it sees no further value creation by allowing T-Mobile to operate as a standalone company. It seems that a merger or network sharing agreement with operators MetroPCS or Sprint Nextel is the most likely eventuality.
The company is said to be favouring a combination with regional prepaid-focused MetroPCS, as this would give it the additional scale and resources needed to compete with its three national rivals. However, the company is also considering other options, including selling the business. BMI believes consolidation in the saturated US mobile market is inevitable. We have long viewed Deutsche Telekom's The company is said to be favouring a combination with regional prepaid-focused MetroPCS, as this would give it the additional scale and resources needed to compete with its three national rivals. However, the company is also considering other options, including selling the business. BMI believes consolidation in the saturated US mobile market is inevitable. We have long viewed Deutsche Telekom's withdrawal as the catalyst for that process.
Discuss at least two (2) strategies that multinational corporations (MNSs) can undertake in order to make profit by leveraging the growing consumer demand

AT&T’s strategy is based around the ‘three screens that many consumers value most – the TV, the PC and the wireless phone. The aim is to integrate communications and entertainment services. This will see information services that can be offered over a TV screen while films can be seen on PCs and mobile handsets. The company aims to be a leader in LTE technology, although it is lagging behind rival Verizon in rolling out services. In March 2012 it announced plans to expand LTE to 12 new markets.
As part of T-Mobile International’s ‘focus, fix and grow’ strategy, T-Mobile International has set the goal of further expanding the global Mobile Communications business area. The ongoing development of new technologies and services throughout the various markets in which it operates is designed to enable T-Mobile to expand its customer base and increase market share. Following the FCC’s block of the acquisition of T-Mobile USA by AT&T the company changed strategy. One ’s 2011 strategy is in a state of uncertainty.

Deutsche Telekom Case Study: A Leading Telecommunication Services Provider on a Global Scale. (2012). Deutsche Telekom Case Study: A Leading Telecommunication Services Provider on a Global Scale, 1-20.
References
SULLIVAN, M. (2012). Which Network is Fastest?. PC World, 30(6), 74-83.
UNITED STATES TELECOMMUNICATIONS REPORT Q3 2012. (2012). USA Telecommunications Report, (3), 3-88.
Jamshidi, H., & Griffin, M. D. (2011). COMPARISON OF WIRELESS SERVICE PROVIDERS BY THE ANALYTIC HIERARCHY PROCESS (AHP). International Journal Of Business, Marketing, & Decision Science, 4(1), 46-55.
Palenchar, J. (2011). Winners, Losers In AT&T, T-Mobile Merger. (cover story). TWICE: This Week In Consumer Electronics, 26(8), 8-9.

Organizational Behavior
References

Atteya, N. (2012). The Conflict Management Grid: A Selection and Development Tool to Resolve the
Conflict between the Marketing and Sales Organizations. International Journal Of Business & Management, 7(13), 28-39.

Deyoe, R. H., & Fox, T. L. (2011). Identifying strategies to minimize workplace conflict due to generational differences. Journal Of Behavioral Studies In Business, 41-17.

Žikić, S., Marinović, A., & Trandafilović, I. (2012). PROMOTION OF CONFLICT MANAGEMENT STRATEGIES IN TERMS OF MODERN BUSINESS. Megatrend Review, 9(1), 201-221.
Singleton, R., Toombs, L. A., Taneja, S., Larkin, C., & Pryor, M. (2011). WORKPLACE CONFLICT: A STRATEGIC LEADERSHIP IMPERATIVE. International Journal Of Business & Public Administration, 8(1), 149-163.

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