AT&T Rides BellSouth Buy, iPhone to $3.1B Profit

AT&T grew its business strongly in the past three months, delivering its tenth quarter in a row of double-digit earnings-per-share growth.

The San Antonio-based telecommunications giant, the nation’s biggest, reported quarterly revenues of US$30.1 billion, almost double from a year ago, and net income of $3.1 billion.

Many of the big increases were attributed to AT&T’s completion of its acquisition of BellSouth, but AT&T also pointed to strong growth of its wireless business, which gained about 2 million new subscribers in the quarter.

iPhone Helped

AT&T’s exclusive deal with Apple to serve as the only U.S. carrier compatible with the popular iPhone helped matters and the company also cited growth of its U-verse TV-over-broadband service as well as Internet Protocol (IP) data revenue from enterprise customers.

“We delivered an excellent third quarter,” said AT&T Chairman and CEO Randall Stephenson. “Revenue growth continues to ramp, merger integration is on track, adjusted earnings and free cash flow are both strong.”

The the strong quarter indicates AT&T is on the right track, Stephenson said.

“Wireless subscriber gains stepped up dramatically,” said Stephenson. “Our enterprise business has greatly improved momentum. Broadband growth is solid. And our AT&T U-verse TV install rate already approaches our year-end target of 10,000 per week.”

Few Choices

AT&T’s subscriber gains might have something to do with the fact that there are only a handful of wireless carriers from which to choose in any given U.S. market, Yankee Group analyst John Jackson said.

“In terms of subscriber additions, this performance is encouraging, but not surprising news,” Jackson told the E-Commerce Times. “The current market structure for wireless service providers is relatively concentrated, so the users that are coming into the market or those changing carriers have comparatively fewer choices.”

Companies such as AT&T that offer good customer relations management and effective marketing “including sexy phones, are in a position to take share,” Jackson said.

Image Boost

AT&T was in the news frequently during the quarter because of its involvement with perhaps the sexiest phone yet: the super-hyped iPhone. Jackson said AT&T’s image got as much of a boost as did its balance sheet.

“The iPhone has clearly helped AT&T secure much needed cachet as well as service revenue, but it’s one of several deliberately wrought and circumstantial issues that are helping their cause,” Jackson said.

AT&T and Apple sold almost 1.1 million iPhones in the U.S. during the quarter, according to Strategy Analytics. The unit has become AT&T’s top-selling device, grabbing 13 percent of AT&T’s overall handset sales, and it said the iPhone might become the top-selling device in the nation during the next year or two, the research firm noted.

Wireless in Bloom

AT&T has 65.7 million wireless subscribers in the United States and, through roaming alliances, “provides the largest global presence among U.S. wireless carriers,” the company said.

AT&T’s wireless revenues totaled $10.9 billion, up 14.4 percent from the same quarter in 2006. “This marked AT&T’s fifth consecutive quarter of improved wireless revenue growth,” said the company. Wireless service revenues, which do not include handset and accessory sales, grew 13.7 percent to $9.9 billion during the quarter and wireless data revenues increased 63.9 percent compared with the third quarter of 2006.

Average Revenue Per User (ARPU) grew by a slim 2 percent, said AT&T, a figure that concerned some analysts. Jackson wasn’t among them.

“I’ve seen some negative commentary from analysts around the 2 percent increase in ARPU,” he said. “I think, in absence of a national 3G network and whatever killer applications might ride on it, any incremental increase in ARPU reflects an effective pricing scheme.”

Wired for Revenue

The company saw 21.6 percent growth in wireline IP data revenue. It reported 6 percent growth from small and mid-sized business (SMBs) and 6.9 percent growth in regional business data revenue primarily driven by gains in broadband, managed Internet, Ethernet and VPN services.

AT&T grew its U-verse subscriber ranks to 126,000, up from 51,000 at the beginning of the quarter. “Weekly install rates in the final weeks of the quarter approached 10,000, up from approximately 5,500 three months earlier,” it noted. “Total video connections, which include AT&T U-verse service and bundled satellite television service, increased by 215,000 in the quarter to 2.1 million.”

By the end of the quarter, 6.7 percent of AT&T’s non-commercial customers were buying video services, up from 4.2 percent one year earlier, said the company.

AT&T seems to be firing on all cylinders, Strategy Analytics analyst Barry Gilbert said.

“AT&T’s strategy appears to be coming together,” he told the E-Commerce Times. “They are showing reduced churn, increased ARPU, generated 2 million new subscribers and have an exclusive on a winning handset, the iPhone. That said, nothing lasts for long in this business. The stakes are high and the competitors are hungry. The big question now is how sustainable is the momentum being observed with AT&T’s wireless execution?”

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Implementation of a New CRM Should Be Easy

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When CRM implementations fail, it's often because the product and its setup process are too complicated, time-consuming, and difficult for users to buy in. (Image Credit: Zoho)

Did you know that a third of all CRM implementations fail? That’s the conclusion of research cited by the Harvard Business Review. The same study found that one of the main reasons CRM implementations fail is that they’re too complex and don’t have a clear focus.

This is hardly surprising. Many CRM applications are highly complex. Migrating data to a new CRM, and getting everyone to use that CRM, is an involved task at the best of times. And the way many CRMs are built, and the way they require users to interact with them, means that implementation really isn’t the best of times.

The Problem With Piecemeal

Many CRMs consist of different applications that have been bolted together through a process of mergers and acquisitions. This makes the initial implementation complicated. Technical and line-of-business staff are forced to interact with different elements of the system in different ways, which makes the learning curve steeper.

It can also lead to duplication of effort, and asking people to repeat time-consuming tasks is sure to cause frustration and put them off using the system. A CRM implementation relies on engaging with and convincing users, from the C-suite right down to the people on data entry.

The more difficult that process is, the less users are likely to complete it. And even if they do complete the initial data migration and set-up, if your users find the CRM complex, disjointed, and time consuming, they won’t keep it up to date. This is possibly the main reason why CRM implementations fail: users simply refuse to use the new platform. As a result, the data it contains soon becomes outdated and incomplete.

So, what’s the best way to avoid this and ensure your investment in a new CRM pays off?

For a start, the CRM you choose should consist of applications and functions which have been designed from the ground up to work together. Migrating data should be easy, and wherever possible, users should only have to do it once to get their data populated to all relevant apps with the right permissions.

Companies should also look for signs that the relationship will be based on trust, right from the start. For instance, if the CRM vendor wants to charge a lot of money to help you overcome the complexity of the integration process, that’s potentially a sign that they view their customers as an ATM.

Users should find the CRM easy to get to grips with. Entering data should be an intuitive process that fits organically into each workflow. It should also be quick to do. Only this way will it become second nature to your colleagues, so that the data in the CRM is kept constantly up to date, making it relevant and actionable.

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Designed for Success

To make these benefits a reality, it usually works best if a CRM has been developed as an integrated and seamless whole. At Zoho, all the features and functions in our CRM suite have been built, not bought, by our own development teams. And they are all designed from the concept stage onwards to work seamlessly together.

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The Salesforce Way

Salesforce Tower in New York City

If you are reading this, you know Salesforce at least superficially. If you know the company just a little bit better, you know it is over twenty years old and practically singlehandedly invented cloud computing.

Other companies that get a shout out for being early to the cloud include Amazon, but they built and maintained their instance of cloud for their private use. Amazon inspired companies like Salesforce. The rest is not history but current events.

Aside from the basics of cloud computing, Salesforce seems to have invented or reinvented much of today’s business environment and best practices. That’s not hyperbole — and it points to a potentially bright future for global business.

When Salesforce got started it was dogma that the corporation existed for the benefit of the shareholder, period. Part of twentieth century business history documents the push and pull between those who believed in shareholder supremacy and those who believed that customers, labor, partners, local communities — stakeholders — had skin in the game and also deserved love.

Defying Cost-Cutting Mentality

Beginning with a famous case Dodge v. Ford — the Dodge brothers were Ford shareholders — courts have generally sided with shareholders that excess cash should be returned to shareholders in the form of dividends and stock buybacks. The idea survives to the present day with the unfortunate result that companies don’t adequately fund activities like research, development, employee training and the like.

In the post-war period accountants focused on tight financial controls and wrestled company management away from the inventors and engineers who made products and tried to perfect them.

Figures like Robert McNamara famously remade Ford in the image of the bean counters to the detriment of the “car guys,” their products, and ultimately their customers. McNamara’s proteges and descendants infiltrated American business and left us with what we have today: too many businesses run by bean counters focused on cutting costs.

In that environment Salesforce has bucked the tide and thrived.

Salesforce on Wall Street

When Salesforce championed the subscription model, Wall Street couldn’t initially wrap its head around it. The Street was highly skeptical of any business’s ability to make money charging by the week or the month. Big deals, the kind that pump up a balance sheet, weren’t plentiful and so subscriptions were suspect. That’s nothing compared to the quizzical looks Wall Street gave when discussing a category of software focused on the customer.

Salesforce was also very early to the party in reconsidering shareholder primacy. It seemed to them, as a CRM company that attending to other stakeholders just made sense. So, they attended to all parties, built software systems to assist in the effort and proselytized to the world about the importance of other stakeholders.

Another way Salesforce has been different has been in its approach to mergers and acquisitions. In a world where at least half of all mergers fail, the vast majority of Salesforce mergers succeed brilliantly. One metric to consider is how many companies want to be acquired by Salesforce. I do not recall the words “hostile takeover” and “Salesforce” ever being uttered in the same breath.

Today Salesforce’s mergers are easier than ever because of prior mergers such as MuleSoft (an integration tool) and the Salesforce platform upon which many acquired companies and candidates have built their products. Vlocity would be a good example.

My Two Bits

Salesforce’s success was not pre-ordained. It came in the era just after the bean counters devastated Hewlett Packard and Xerox, two powerhouses that invested heavily in research and development. Bean counters more or less decided that all that spending on new product development would better serve their plans for dividends and buybacks. Neither company retains its greatness from mid-century nor is it likely to regain it.

To me Oracle looks threatened in the same way. In order to keep corporate raiders at bay the company has repurchased billions worth of its stock and pays out hefty dividends to keep its stock bobbing like a cork on the sea of Wall Street.

I am happy to say that in my career as an analyst, the questions I have tried to answer dealt primarily with how and how well software worked, not about how much money a company made. That said, it’s hard to deny a feeling of I told you so when Salesforce announces earnings. According to its earnings announcement for its Q2, year over year revenues were up an astonishing 24.28% at $7.41 billion — easily beating Wall Street estimates, a regular occurrence.

The company with a radically different product strategy, and a business model that included all stakeholders, continues to do well and to teach those of us willing to learn how business can be done better in the twenty-first century. What’s next is anyone’s guess. Hopefully the bean counters will keep a respectful distance.

Denis Pombriant is a well-known CRM industry analyst, strategist, writer and speaker. His new book, You Can't Buy Customer Loyalty, But You Can Earn It, is now available on Amazon. His 2015 book, Solve for the Customer, is also available there. Email Denis.

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