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A Brief History: Post Divestiture

The United States woke up on January 1, 1984 to discover that its telephones worked just as they had the day before. But AT&T started the day a new company. Of the $149.5 billion in assets it had the day before, it retained $34 billion. Of its 1,009,000 employees it retained 373,000. Gone even was the famous Bell logo and name, given under the agreement to the regional telephone companies, excepting only the name's use in Bell Labs. In its place was a stylized globe and the monogram "AT&T."

Evolution of corporate logo. New AT&T logo.

Success would require no less than the most drastic change in corporate culture ever undertaken by a major American corporation. The old AT&T -- the Bell System -- as a regulated monopoly had been largely insulated from market pressures for most of its history. Its culture venerated service, technological excellence, reliability, and innovation within a non-competitive internally-driven framework of taking however much time and money it took to get things done right. The new AT&T had to learn how to find out and deliver what its customers wanted, when its customers wanted it, in competition with others who sought to fill the same customers' needs. Although AT&T had great technological and personnel strengths upon which to build, the transition proved far more complex than anyone imagined in 1984.

Long distance telephone service became an intensely competitive business. Having started from a monopoly business, it was perhaps inevitable that AT&T's market share would fall. And it did-from over ninety percent in 1984 to around fifty per cent a dozen years later. Between competitive pressure, new technologies (primarily fiber optic transmission) and the shift of some fixed costs to elsewhere, prices plummeted, dropping by an average of forty percent by the end of the 1980s. Volume exploded. In 1984, AT&T carried an average of 37.5 million calls per average business day; in 1989, the equivalent volume was 105.9 million, and in 1999 270 million. In the 1990s, the growth of computers, and then the internet led to an increasing percentage of what customers sent over the network taking the form of data rather than conversation.

AT&T's continued financial strength helped underwrite growth and improvement, from the multi-billion-dollar digitalization of its entire network, through a sustained move into the international market and nearly 200 countries, to major mergers and acquisitions. Press Announcement Photo. One such merger came in 1991 when AT&T acquired computer maker NCR in a $7.3 billion deal designed to give the company's customers an edge as communications and computing converged. Another, the agreement to acquire McCaw Cellular in 1994 for $11.5 billion, gave AT&T direct access to consumers for the first time in a decade. The unit, renamed AT&T Wireless, established AT&T as a leading force in the fast growing wireless telecommunications industry.

The manufacturing operations too faced a transition from monopoly to competition. The largest manufacturing business, recast as AT&T Network Systems, had as its major customers the now independent local telephone companies (RBOCs). Other manufacturers competed for their business and the RBOCs cast an increasingly wary eye on AT&T Network Systems, at times seeing AT&T more as a real and potential competitor than a partner. Network Systems continued as the US market leader, selling both to its traditional customers and to new ones. Network Systems also led the way as AT&T returned to the global arena for the first time in seventy years, establishing plants, subsidiaries, and joint ventures in countries as varied as the Netherlands, Japan, and China.

The corporate strategies and organizations that made sense in the early 1980s, became increasingly problematical as the 1990s progressed. Not only were there few synergies between the communications and manufacturing businesses, but as the US moved toward rewriting its communications laws, the two businesses increasingly became obstacles to each others growth. Still, CEO Robert Allen's announcement on September 20, 1995 that AT&T would be restructuring took nearly everyone by surprise.