Case Analysis AT&T: An Underperforming Conglomerate ( please read the case)

Evaluate AT&T's corporate strategy. Does it make sense?

T-Mobile AT&T tried to acquire T-Mobile, a mobile competitor, but the U.S. government blocked the deal. As a result, AT&T paid one of the largest M&A breakup fees for a failed deal. AT&T was forced to pay T-Mobile $4 billion in cash and assets, which represented 10.2% of the purchase price." AT&T Strategy10 AT&T's Annual Report provided a discussion of the strategy: . With our acquisition of Time Warner-now known as WarnerMedia-we have brought together one of the best collections of premium video content, a large base of direct-to-consumer relationships, high- speed networks optimized for video, and an advertising technology platform that will make premium video advertising more relevant and valuable. We believe this combination of capabilities has positioned us to thrive in the coming years, as both the communications and entertainment sectors undergo serious transformations driven by new innovations in technology and changing customer demands. We are building a broad portfolio of video services to satisfy the media and entertainment needs of every consumer, from those who demand a premium 4K TV experience with extensive sports and content libraries to those who are more price-conscious and want smaller packages of content. We're also working on an exciting new premium subscription-video-on-demand service from WarnerMedia that will draw on the rich and deep content libraries of HBO, Warner Bros., and Turner. We expect to introduce this service by the end of 2019, and we believe it will be a compelling offer that drives significant demand. This combination of premium video content and our direct-to-consumer relationships provides with a valuable resource: data-driven insights we can use to develop new advertising models and make ads more relevant to consumers. Our newly formed advertising technology company, Xandr, will add considerable new value to both our communications and entertainment businesses. Bringing together all these capabilities sets up a virtuous cycle: Great content drives deeper customer engagement. Deeper engagement provides greater customer insights into the content our customers enjoy. Those insights inform the creation of new content and facilitate relevant targeted advertising that drives deeper engagement. And the cycle repeats. Exhibit 1 shows the linkages between the various capabilities. Exhibit 1. AT&T Capabilities PREMIUM D2C Premium content increases CONTENT . . . . . . DISTRIBUTION consumer engagement. Broad direct-to-consumer DATAINSIGHTS relationships inform the creation and curation of new content. Advertising technology makes ads CONSUMER more relevant and improves the overall experience for consumers and advertisers alike. High-speed wireless and wireline networks deliver the bandwidth . . . . . . . . . . . .. needed to keep up with demand HIGH-SPEED ADVERTISING NETWORKS TECHNOLOGY for premium content. Source: AT&T 2018 Annual Report