an issue as the company had a captive market, although it invested heavily in research and development through Bell Labs.
AT&T now faces a considerably different competitive environment as it has lost the support of the local phone companies and faces competition in its own market. In fact, the company is now competing in different markets than it has in the past, including information systems, which means that it will not have the same market expertise that it formerly did in all areas of operation. Compared to its competitors, AT&T has a mid-range debt ratio, but these competitors vary from long distance providers (MCI) to phone manufacturers (Northern Telecom) and data processing companies (IBM). AT&T's bond rating is also superior to all of its competitors save IBM.
Long-term debt financing seems to be an attractive financing option for AT&T. Its bond rating can certainly support additional debt and its interest coverage remains healthy. The company may also want to consider a stock split and repurchase program so that the stock price keeps it in a more affordable range and so the company can control more of its equity through the repurchase program.
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