I’m not a Wall Street expert, but I can't imagine that there is anything good about being booted from the S&P DOW Jones industrial average. Yet this is exactly what happened to AT&T on March 6th. The S&P DOW Jones Indices, a subsidiary of McGraw Hill Financial, announced that it would replace AT&T with Apple on the landmark stock index effective March 19th.
One of the reasons given for the change was that the DOW is over-weighted in telecom. Other telecom members of the index include CenturyLink, Frontier, Level(3), Verizon, and Windstream. AT&T was cited as having one of the lowest prices in the index, trading at $33-$34 at the time of the announcement (up just 3.2% year-over-year as compared to Apple, which is up 70% in year-over-year performance). David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, spoke further to the rationale behind the decision by saying "AT&T and Verizon are quire similar, though AT&T has a smaller market capitalization." Verizon will remain on the telecom sector in the index.
For those of us who have worked in the telecom industry for the last few decades, this is a stark reminder that giants can fall – and, when they do, they fall hard. AT&T was one of North America’s largest and most powerful companies until divestiture in 1984. Since then, AT&T has operated in a time of tremendous change in both the telecom industry and closely-related technology industry.
No longer being viewed as a stock market bellwether is a tough pill to swallow, but it doesn’t really signal anything brand new for AT&T’s enterprise customers.
The carrier is – and has been – under pressure to increase margin and market share. And that combination often leads to added complexity and cost during the purchasing and renewal process.
Enterprise customers should be hyper-vigilant in their efforts to manage and control telecom expenses with AT&T. This starts with maintaining accurate visibility into the inventory of AT&T services and equipment across the enterprise, eliminating overbuying/underutilization of assets, aligning usage with best-fit plans, and securing best-in-class pricing, discounts and terms for all investments. And as the carrier landscape continues to reshape itself, enterprise customers should regularly (1) optimize usage and (2) assess where to place their volume.