AT&T_2011

AT&T_2011 - AT&T (then & now) 1 First,...

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1 AT&T (then & now)
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2 First, analysis of AT&T “then” (divestiture of Baby Bells 1982)
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3 Supplied telecommunications service to over 80% of U.S. telephone users 1981 largest private enterprise in the world (employed over 1 million workers, 798 thousand in local operating companies) “widows and orphans stock” (over 3M shareholders, 95% held less than 600 shares, never missed/lowered dividend since 1885) Target dividend payout ratio of 60% (one-third of dividends reinvested back in company) debt ratio of about 40%, but maintained AAA rating local operating companies very capital intensive and generated fairly stable cash flow (safest of AT&T’s units)
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6 Antitrust Suit January 1982 AT&T agrees to spin-off seven “Baby Bells” “New” AT&T will include the following AT&T Communications: long distance business Western Electric: provide equipment and support to local telephone companies AT&T Information Systems (ATTIS): provide telecommunications equipment to businesses and households Bell Laboratories: expected to continue to conduct R&D Computers?
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7 Impact of divestiture on AT&T financial situation Stock price up 4% relative to S&P 500 day after announcement of anti-trust settlement Bond prices fall on news S&P adds AT&T to possible bond- downgrade list
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8 Why Possible Downgrade? AT&T no longer a utility and a monopolist in a highly-
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This note was uploaded on 01/02/2012 for the course FINANCE 347 taught by Professor Bayou during the Fall '11 term at NYU.

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AT&T_2011 - AT&T (then & now) 1 First,...

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