AT&T Inc.

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Source: Barchart.com

AT&T (T) is a Dallas-based holding company that comprises telecommunications and technology subsidiaries and affiliates; its history dates back to 1876 and Alexander Graham Bell’s invention of the telephone. The company, long referred to as “Ma Bell,” swelled to great corporate heights as it built much of the United States’ local and long-distance telephone services, controlling a monopoly in the telecommunications industry for nearly a century.

Along the way, AT&T invented and developed a variety of technological advances in communications through its Bell Labs subsidiary; it underwent a series of reorganizations and name changes, mergers and acquisitions, government deregulations, and corporate spin-offs. Throughout most of the 20th century, it held on to its “natural monopoly” dominance in the developing telecommunications field.

AT&T is still a behemoth, but with a much narrower focus as a premier broadband provider in the U.S. through three communications segments:

AT&T’s footprint outside the U.S. includes wireless services and equipment in Mexico.

Alexander Graham Bell and another inventor, Elisha Gray, were working on similar telephony devices at the time; they each filed patent documents in Washington, D.C., on the same day, February 14, 1876. Ultimately, Bell was granted Patent US174465A on March 7, 1876, and has long been considered the father of telephony. That also initiated the launch of the Bell Telephone Co., which was formed by Bell and two investors, Gardiner C. Hubbard and Thomas Sanders, in 1877.

Bell’s first telephony transmission of what they called “intelligible” speech—it was actually quite crackly and barely audible—was held with his assistant Thomas Watson on March 10, 1876, through wires between Boston and Cambridge, Massachusetts.

The Bell Company was already embroiled in a race with Western Union, the leading telegraph company, for telephone service development. Western Union, which was looking to diversify outside the telegraph, had acquired its own telephone devices and patents, but ultimately lost a patent dispute with Bell in 1879. As part of the agreement, Bell promised to stay clear of telegraphs.

Bell struggled with more legal tussles through most of the next decade, and it wasn’t until 1885 that the American Telephone & Telegraph Co., AT&T, was formed as the Bell Telephone subsidiary responsible for building long-distance telephone lines, pioneering most of the telecommunications industry. The Bell System was moved under the AT&T umbrella in 1899.

The first few decades—indeed, much of the first 100 years—were a remarkable combination of disruptive innovation and just plain disruption: Reorganizations, new names, contentious takeovers, and competitive issues. Western Electric, an upstart electrical equipment manufacturer (the brainchild of Elisha Gray and Enos Barton, an entrepreneur) began supplying equipment in 1869, ultimately to Western Union and Morse Telegraph.

But by 1872, Western Electric had become a major contractor with the Bell Company. Within the next decade, it would be the exclusive supplier, purchaser, and distributor for AT&T and other Bell subsidiaries. Bell eventually bought Western Electric in 1881.

Throughout much of the early 20th century, AT&T continued to build out the nation’s communications infrastructure. By 1939, AT&T controlled 83% of all U.S. telephones, 98% of all long-distance telephone lines, and manufactured 90% of all U.S. phone equipment.

As a natural monopoly, the company could focus on extending its system of phone lines and maintaining a network of operators without worrying about the competitive landscape. With the private sector managing the construction and maintenance of the nation’s communications infrastructure, the U.S. government could manage what was essentially a massive public works project without resorting to large-scale taxation.

But by the middle of the century, many policymakers became concerned that AT&T’s hold on the telecommunications industry had become too great. Efforts to break up Ma Bell were typically lengthy and largely unsuccessful. In 1949 the Justice Department sued AT&T under the Sherman Antitrust Act in an effort to pull Western Electric out of the Bell System. The suit ended in 1956 in a consent decree that kept Western Electric in the system, but restricted monopolistic practices.

That didn’t stop AT&T from exponential growth. By the 1970s it had nearly a million employees and was the largest company in the world, with total assets then exceeding the combined assets of General Motors, Exxon Corp., and Mobil Corp.

In 1974, the U.S. Department of Justice once again set out to take the monopoly apart through its second antitrust suit. It would take a full decade to conclude an agreement that forced AT&T to divest itself of its nearly two dozen operating companies that would become separate entities, operating local telephone networks. It was the end of Ma Bell’s reign.

The operating companies were all disconnected from Ma Bell and reorganized into seven regional phone companies:

AT&T gave up its Bell moniker to these companies, which were informally tagged the “Baby Bells.”

Two other Bell System components—Cincinnati Bell in southern Ohio and Southern New England Telecommunications (which covered Connecticut)—were partially owned by AT&T, and were able to retain their autonomy (and local telephone monopolies) post-breakup. However, they were not considered part of the seven Baby Bells.

Despite the divestiture, AT&T was able to hold on to Bell Laboratories, Western Electric, and Long Lines (the long-distance relay towers for microwave frequency). But it was not allowed to use the “Bell” name with anything other than Bell Labs.

The breakup had a positive side for AT&T: It freed the company to delve into previously forbidden fields such as data processing and computer communications. That led to the 1991 purchase of NCR Corporation (NCR), maker of computers, electronic cash registers, and other data-processing systems. Next came its first buy into cellular telephone providers with McCaw Cellular Communications, Inc., in 1994. That was also the year the company formally adopted its traditional byname, AT&T, and became the AT&T Corporation.

Once again, AT&T found itself with too many hands in too many pots, including cellular and long-distance telephone service, computers, data systems, communications equipment manufacturing, and even consumer credit cards. The company was broken up again, but not by government intervention; rather, it came at the hands of chair and CEO Robert Allen.

Under what The New York Times called “a veil of remarkable secrecy,” Allen engineered a split of AT&T into three separate companies. In his words, the plan was a response to changes in technology and government regulation that had “turned the communications world topsy-turvy.”

“The vertical integration model was good for its time, but shifts in the market and public policy suggested it was time for us to change,” Allen said at the time. AT&T’s self-imposed “trivestiture” was the largest corporate breakup in history:

Two years after the dismantling became official, Edward Whitacre—who started his telephone industry career doing repair work in Texas for Southwestern Bell—was named chair and chief executive of Southwestern Bell. He is credited with turning the smallest of the Baby Bells into what would become the largest telecommunications company in the world by 2007 and what we would know today as AT&T.

First, in 1995, Whitacre changed the Southwestern Bell name to SBC Communications Inc., a hint toward his grand scheme. Over the next decade, he would spearhead a series of acquisitions, including four other former components of the Bell System:

In essence, he was rebuilding what the government had torn apart. In 2005, the plan would come full circle; SBC merged with AT&T Corp., reuniting the long-distance communication systems with many of the former Baby Bells. The combined company would be renamed AT&T.

Randall Stephenson was another chief executive who spent his entire career at AT&T, beginning in 1982 at Southwestern Bell. He worked his way to the top primarily through the finance division and was named finance chief before becoming chief executive in 2007.

Stephenson’s tenure was marked by a penchant for acquisitions—some good, some questionable, and at least one disastrous—but all in an attempt to diversify and further boost the size of the behemoth. He was reportedly so focused on growth by acquisition that, according to a Bloomberg report, he “kept a color-coded roster of potential companies he wanted AT&T to buy, leading to 43 acquisitions.”

In March of 2011, AT&T launched a $39 billion takeover of T-Mobile (TMUS) that would have once again created a near-monopoly, this time to become the largest cellular carrier in the U.S. At the time, broadband capacity was an issue, and an AT&T and T-Mobile merger, the companies said, would lead to better service with fewer dropped calls and a wider network.

The Obama administration’s Justice Department and the Federal Communications Commission thought otherwise, both throwing up roadblocks. That December, knowing it was in a losing battle, AT&T dropped its bid. Stephenson had been so confident the deal would get regulatory approval that he agreed to a $3 billion cash breakup fee if it didn’t go through. That was a big bill that AT&T had to cover.

Five years later, Stephenson ventured down another path—this time into the media and entertainment industry—with a plan to combine AT&T networks with Time Warner’s.

In late 2016, AT&T announced its plan to merge its broadband and wireless networks with Time Warner’s treasure trove of film, animation, and television media rights, ranging from HBO and CNN to Harry Potter and several superhero franchises. This plan for a vertically integrated media juggernaut that bypassed cable middlemen would be renamed WarnerMedia.

That deal, too, faced obstacles from the start, including an antitrust suit leveled against it by the Trump administration’s Justice Department, which believed the deal would “greatly harm American consumers.” After months of litigation and negotiations, a district judge sided with AT&T and allowed the deal to go through. It closed in mid-2018 at a hefty price tag of $85.4 billion.

The next four years were rocky. Cultures crashed between the buttoned-down AT&T and the more freewheeling Time Warner. A reorganization dissolved some units and created other new ones. Executives came and went. Acquisitions were made. Deep cost-cutting ensued.

In 2020, Randall Stephenson retired, handing the reins over to John Stankey, another AT&T lifer (aka “Bellhead”). Although Stankey was an architect of the move into media and entertainment—and, in fact, led the division for nearly two years—he knew going into the top job that he would have to sell off pieces of the company to better focus on the future.

By May of 2021, AT&T announced it would spin off WarnerMedia, which would combine with Discovery’s nonfiction and reality cable and television channels. Although AT&T shareholders would still hold 71% of the newly formed public company’s shares, it was AT&T’s admission that its effort at gaining a foothold in the entertainment world had been a colossal failure.

In a statement to the Times, AT&T admitted that: “A fundamental and dramatic repositioning of an entrenched corporate culture—multiple corporate cultures actually—will certainly leave broken glass, disenfranchised individuals and disagreements on the difficult path to reinvention.”

In 2022, AT&T announced it would sell WarnerMedia’s entertainment division to Discovery, Inc. At a sale price of $43 billion, AT&T recouped only half of what it had paid to acquire WarnerMedia just four years before.

Only a few months earlier, AT&T had also spun off DirecTV, its satellite broadcast unit, as it began refocusing its efforts on wireless and digital infrastructure.

When Stankey made the decision to steer AT&T out of the media and entertainment industry, he was clear on the firm’s new direction: To drive consistent growth by focusing on the firm’s traditional moneymakers, simplify the company, and reduce leverage (specifically, slice the heavy debt load that the company took on in order to complete its acquisitions).

When the deal with Discovery closed, AT&T held over $130 billion in net debt. It has aggressively worked to cut debt while also heavily investing in broadband infrastructure. The company claims to have learned from its diversions into different businesses that didn’t create value for the company.

AT&T’s decision to focus on wireless and fiber is a departure from the Bell Labs–type technological innovation of its 20th century peak, but it brings the company back to its roots of clear, connected, and reliable lines of communication.