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Fisher Investments on Telecom by Andrew S. Teufel, Dan Sinton, Fisher Investments

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Chapter 6

CHALLENGES AND OPPORTUNITIES

Understanding the unique challenges a sector faces can help investors better shape forward-looking expectations for the sector. Challenges aren’t always all negative—they can also frequently morph into opportunities for the firms and industries that can rise above. This chapter will detail some of the major challenges and opportunities Telecom firms face by examining AT&T’s revenues. AT&T is a decent proxy for the sector overall and is useful for this particular exercise because its diverse business segments encompass the same businesses as the vast majority of other Telecom firms. This should NOT be taken as an endorsement for or against AT&T.

A great place to start gathering information about AT&T, or any publicly traded firm, is its annual report, which can be found on the firm’s website or its EDGAR filings at www.sec.gov. Such filings include earnings, profit margins, and a whole slew of information further detailed in Chapter 8. But for our current purposes, we’ll take a look at AT&T’s 2009 sales in Table 6.1. Also, we’ll focus more on Wireline and Wireless than Advertising & Publishing because they represent greater percentages of total revenue and therefore likely play a larger role in determining AT&T’s performance in the near term (12 to 24 months).

Table 6.1 AT&T’s 2009 Revenues

Source: AT&T 2009 Form 10-K.

Business Segment Percent of Company Revenue
Wireline 53%
Voice 27%
Data 21%
Other 5%
Wireless 43%
Voice

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