Price competition between large wireless phone service providers both in the United States and internationally have affected the overall profits of AT&T. Further, the introduction of smartphones such as Apple’s (AAPL) iPhone 6 has influenced many consumers who have abandoned the company, which has hurt its profits. Low-cost and pay-as-you-go plans from other companies such as Sprint (S) and T-Mobile have negatively affected AT&T’s market share and reduced its customer base (AT&T Inc. Annual Report, 2014). Further, the company’s spending on updated networks and infrastructure have increased expenses and added to its large debt obligations (Krause Fund Research, 2014). The rising cost of content for mobile providers will most likely prevent earnings growth over future quarters. Lack of Flexibility AT&T’s broad size and complex structure usually leaves the company struggling to adapt to an unstable wireless segment. In this situation, small and less-developed competitors have the capability to present new products to the market at a fast pace and with less …show more content…
Recently, the company purchased DirecTV for an average amount of $48.5 billion in cash and stock (AT&T Inc. Annual Report, 2014). Despite the fact that the pay-for-television market has not completely matured, the deal enables AT&T to expand its video offerings and negotiate content agreements with the nation’s largest media outlets. Further, the purchase provides the company with access to DirecTV’s large customer base including 11 million subscribers in Latin America while improving its cash flow and generating annual cost savings of $1.5 billion in around three to five years (Pomerantz, 2014). Increased cash flow is important for AT&T currently because the company has decided to invest increasingly in its wireless/broadband lineup among other activities set to improve the company over its