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AT&T Pre Breakup

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When the Bell System was originally broken up, the old AT&T was split into a new AT&T plus seven regional telephone companies. The specific reason for forcing the breakup was to increase the degree of competition in the telephone industry.

In the court order that set the terms of the breakup, the capital structures of the surviving companies were specified, and much attention was given to the increased competition telephone companies could expect in the future.

How do you think the optimal capital structure after the breakup compared to the pre-breakup optimal capital structure?

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Solution Summary

The solution discusses AT&T pre and post breakup

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The pre-breakup optimal capital structure was strong. The company was investing and generating revenues that were significant and impressive. "Over the past twenty years, (de)regulatory and technological shocks in the telecommunications industry have spurred a number of significant corporate restructurings. These shocks altered the capital structure demands of various asset ...

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