by Paul Lines

Created on: December 22, 2011   Last Updated: December 30, 2011

Established for more than a century, AT&T is one of the world’s largest telecommunications corporations. Head-quartered in Dallas, Texas the corporation, which has a global workforce of approaching 260,000 thousand, has operations and provides telecommunications services in over 200 countries world-wide. The products and services offered by AT&T range from the provision of global telecommunications networks, mobile broadband to IP-based television media services.

Growth of the corporation

Much of the corporation’s physical growth as a global player during the course of the twentieth-century has resulted from T-Mobile USA from its German parent company Deutsche Telecom were thwarted on competition grounds by intervention by US regulators. However, this is not expected to halt AT&T’s aggressive policy of expansion within its domestic market.

The financials

Despite having experienced financial setbacks during 2008 and 2009 due to the effects of the ongoing global financial and economic crisis, in line with many other commercial corporations, AT&T has managed to achieve a significant level of financial growth over the past five years. Since 2006, AT&Ts global revenues have almost double from $62.5 billion to $124 and its net income by over 60% from $12.5 billion (2006) to $20.2 billion (2010). Similarly, the corporation has managed to maintain an increase in its declared dividend policy for the 27th year in succession.

Key performance indicators

Concerning the current year (2010) key performance indicators, in terms of profitability, AT&T has maintained a reasonably healthy position, with the operating margin ratio having only dipped slightly from 15.1% in 2009 to 14.67% in 2010. Return on capital employed (ROCE) has also retained an equilibrium over the last to years, providing 6.8% in 2010 (6.9% 2009). However, one area of concern that remains within these indicators is related to the current ratio, which denotes the current liquidity position of the corporation. Ideally, investors would expect current assets to match current liabilities, indicating that the corporation is able to meet its immediate commitments from liquid resources, without having to sell assets. However, the current position with AT&T is that this ratio currently stands at 0.59 to 1 for 2010, although this does represent a significant improvement over the previous year, when the same indicator showed that current assets represented only 0.39 of the current liability level. Nonetheless, given the impact of the recent economic climate it is reasonable to assume that the corporation will potentially be able to correct this position within the next year or so.

Stock market performance

When considering the performance and added-value being provided to current and potential investors, it should be noted that while AT&T has, within acceptable margins, mirrored the performance of the S&P telecom index since the beginning of 2006 its share value has significantly outperformed the S&P  500 index, which increases its attractiveness.

Investment opportunity

In conclusion therefore, based upon the data that has been analysed it is considered that for an investor, AT&T remains a positive investment for those desiring a medium to longer term growth in the value of this investment. However, it should be recognised that the current liquidity position of the corporation is not as positive as it might be and this could present challenges in the future, especially if the global economic climate does not see significant improvement.

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