SWOT Analysis for Verizon and AT&T - Paper Example

This paper presents a SWOT analysis of Verizon and AT&T the largest two wireless communication providers in the United States. The firms command approximately 70% of the wireless market in the United States. A SWOT analysis is an essential tool for the internal analysis of a company's situation which evaluates both internal and external influences upon its common vision (Pahl&Richter, 2009). A firm has control over the strengths and weaknesses however the factors beyond the firm's control are the opportunities and threats. The report aims to provide a high-level look at where Verizon and AT&T can build on their current successes while also focussing on implementing continuous improvement methods which will facilitate corrections on current weaknesses or threats. The report will firstly present the SWOT analysis for Verizon after which it will outline the outcome of the review of AT&T. Lastly, it will indicate the main overall conclusions as well as some reflections on the result of the analysis.

SWOT analysis of Verizon

Strengths in the SWOT analysis of Verizon

Verizon has an impressive financial performance. 2016 saw the company report total revenues of $126B, $22.7B in cash flow from operations, 114.2 million wireless retail connections, 4.7million Fios video subscribers and an annual dividend increase for the tenth consecutive year (Verizon, 2017). Verizon boasts of a strong brand image which internally is a major strategic factor which gives the firm a competitive advantage over its rivals. The high brand equity is as a result of its marketing campaigns and reliable products. Verizon runs a unique business model known as Verizon Fios where it offers fibre network cables in some areas. Verizon Fios offers high data connection and speeds thus creating a broad base of loyal customers. Surveys by RootMetrics ranks Verizon as the number one telecommunications service provider in the United States for a seventh successive time (Verizon, 2017). The rank gives Verizon an edge over its rivals. The next big thing in telecom will be 5G networks; currently, Verizon is already leading the introduction which will open up new opportunities for the firm (Verizon, 2017).

Weaknesses in the SWOT analysis of Verizon

Verizon solely depends on the US market since it has no international presence which could significantly impact its business in case of adverse economic events in the US. Verizon is losing its advantage on premium pricing since rivals AT&T, and T mobile are also working on their pricing to match that of Verizon which will lead to a decline in revenues from pricing. Verizon faces customer erosion to smaller carriers like Sprint which have better plans such as the introduction of new free unlimited plans to post-paid subscribers.

Opportunities in the SWOT analysis of Verizon

International expansion will increase customer base especially in Asian markets which are growing fast. Also, it will mitigate Verizon from overreliance on the US market. Verizon will benefit from technological leadership with the introduction of 5G connectivity. The network will open up new market opportunities and impact industry sectors which will create an estimated $12.3trillion in market opportunity by 2035 (Verizon, 2017). Increased investments in the internet of things will continuously open up a new market of opportunities for the firm.

Threats in the SWOT analysis of Verizon

Verizon faces increasing competition from rival brands like AT&T who release new products and offers from time to time snatching away customers. Regulatory pressures have been on the increase for reasons such as terrorism. Regulations affect the manner in which firms in the telecom industry carry out their operations, and Verizon is not an exception. Maintenance and expansion costs for the infrastructure are quite significant, and these have a massive impact on the company's bottom line. Such costs hamper global expansion. Moreover, natural disasters can affect business performance through damage of Verizon's technological assets.

SWOT analysis of AT&T

Strengths in the SWOT analysis of AT&T

AT&T boasts of robust financial performance in the telecommunications segment. The financial highlights of the 2016 annual reports indicate its consolidated revenues to have increased by 11% to $163.8B while cash from operations rose from $31.3B in 2014 to $39.3B in 2016 a 25% increase. 2016 saw an increase in operating revenues from $146B to $163B (AT&T, 2017). AT&T has multiple complementary products and services which enable it to cater for various segments such as government agencies, businesses, and individuals. The vast portfolio diversity reduces reliance on any single sector thus mitigating concentration risk. The firm has heavily invested in its infrastructure through its capable network capacity of wired and wireless capabilities which gives it an advantage over its rivals through seamless service delivery. The infrastructure enables it to have a global reach in more than 200 countries serving millions of customers. AT&T has significantly invested in intangible assets such as licenses, customer lists, and orbital slots. The wireless licenses give the company exclusive rights to the utilization of specific radio frequency spectrums in the provision of wireless communication services. 2016 saw a significant increase in these valuable assets from $197B to $199B (AT&T, 2017). The acquisition of Directv a leading digital television and entertainment service provider in 2015 has enabled AT&T to provide an integrated experience through the provision of robust premium entertainment packages. The acquisition makes the company one of the largest pay-TV thus increasing its customer base. Other strengths include a significant market share in the telecommunications segment, increased research and an enormous brand value of more than $59B giving it a considerable edge.

Weaknesses in the SWOT analysis of AT&T

One of the main weaknesses is the decline in voice calls. With the fast internet, more customers opt for video calling leading to a drop in voice calls which ultimately hampers the profits. 2016 annual reports indicate declining voice connections from 14,002 in 2014 to 11, 278 in 2016 (AT&T, 2017). AT&T's balance sheet shows that a significant part of its financing is through debt compared to its rivals thus exposure to leverage risks. AT&T is dependent mainly on Northern American markets with a limited presence in the Asia Pacific region, therefore, a vulnerability in case of adverse economic events in North America.

Opportunities in the SWOT analysis of AT&T

There are opportunities for AT&T which includes industry consolidations in the form of acquisitions of smaller companies which will strengthen its business and enhance its organic growth. Globally there is an increase in demand for cloud computing as the world goes more digital and wireless. Investments in cloud computing is an area that AT&T could venture. Globally there are investment opportunities, AT&T could acquire new customers and increase market share through international expansion in emerging economies. AT&T can generate more revenue through increasing its internet of things solutions.

Threats in the SWOT analysis of AT&T

AT&T faces intense competition from other service providers in the industry like Sprint and T mobile and Verizon. Most people in the United States live in areas with at least four competing carriers (AT&T, 2017, p. 27). Domestically AT&T has to comply with regulations in the United States. However, subsidiaries operating in other countries are subject to laws in those states. The regulations directly affect the company's operations through adverse effects on data traffic and revenues. The saturation of the US market results in price wars and revenue decline.

Conclusion

The swot analysis reveals that both companies could gain more opportunities from global expansions to avoid reliance on the US markets. Further, they should diversify their businesses through acquisitions of firms in related sectors which will spread risks and provide them with excellent investment opportunities. However, it is prudent for the companies to undertake costs and benefits analysis before investing. AT&T and Verizon will open up more markets by fully implementing the internet of things. Both firms also need to strengthen their competitive advantage through quality services which will enable them to overcome some of the threats such as competition and market saturation.

References

AT&T. (2017). AT&T inc. 2016 annual report. Retrieved from https://investors.att.com/~/media/Files/A/ATT-IR/financial-reports/annual-reports/2016/att-ar2016-completeannualreport.pdf

Pahl, N., & Richter, A. (2009). Swot analysis idea methodology and a practical approach. Norderstedt: Grin Verlag.

Verizon. (2017). Verizon annual report 2016. Retrieved from http://www.verizon.com/about/sites/default/files/annual_reports/2016/downloads/Verizon-AnnualReport2016.pdf