Financial performance analysis of US and world telecommunications companies: Importance of Information Technology in the telecommunications industry after the AT&T breakup and the NTT divestiture

Authors:
Mika Goto
Affiliations:
Central Research Institute of Electric Power Industry, 2-11-1, Iwado Kita, Komae-shi, Tokyo 201-8511, Japan
Venue:
Decision Support Systems
Year:
2010

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Abstract

This study investigates the financial performance of the world telecommunications industry by DEA-DA (Data Envelopment Analysis-Discriminant Analysis). The proposed use of DEA-DA has a linkage with Altman's Z score that has long served as a methodological and conceptual basis in finance. Based upon the Z score of telecommunications companies, we rank them for financial assessment. After evaluating their financial performance of the firms, this study pays attention to the financial performance of AT&T (American Telephone & Telegraph) and NTT (Nippon Telegraph and Telephone) after their divestiture. This study finds that AT&T outperformed NTT because AT&T changed itself to an IT (Information Technology) company that provides wireless communications services and other IT services, but NTT separated IT and wireless services into the other companies after the breakup.