From
monopoly to
competition
How the three
rules shaped the
telecommunications
industry
From monopoly to competition
About the authors
Philip Wilson is a director in the Telecommunications, Media, and Technology practice at Deloitte
Consulting LLP. Wilson has over 25 years of experience in the telecommunications industry. He
has developed corporate strategy for over 200 companies in 27 countries, and has taken roles both
as a consultant and at a senior level in industry. Recent publications include The impact of licensed
shared use of spectrum, published with the GSMA, and Airwave overload? Addressing spectrum
strategy issues that jeopardize US mobile broadband leadership.
Geri C. Gibbons is a senior manager in Deloitte Services LP. She has more than 25 years of
experience in sales, marketing, strategy, market research, and eminence with Fortune 500
companies and major professional services firms. Gibbons has held senior positions in industries
as diverse as life sciences, telecommunications, technology, and financial services in the United
Kingdom and the United States.
Acknowledgements
The authors would like to thank Dan Littmann, Greg Tevis, and Nitin Shastri from Deloitte
Consulting LLP and Negina Rood, Derek Pankratz, and Rob Del Vicario from Deloitte Services
LLP for their contributions to this article.
How the three rules shaped the telecommunications industry
Contents
A historical perspective | 2
The first step: Revenue before cost | 8
The second step: Better before cheaper | 13
The third step: There are no other rules | 14
Applying the three rules today | 16
Endnotes | 19
From monopoly to competition
A historical perspective
T
HE telecommunications industry has
undergone dramatic shifts in its evolution.
Since the end of the long-distance monopolies in the early 1980s and local monopolies
in 1996, the industry has seen deregulation,
technological innovation, and new market
entrants. With each change in industry structure and technology, telecom companies have
had opportunities for differentiation—opportunities exceptional performers took advantage
of by creating and capturing value.
Telecom companies today continue to face
challenges, including significant intermodal
competition (cable, wireline, cellular) and
competition from adjacent businesses, for
example, from over-the-top (OTT)-based service providers such as Google and Apple. They
are once again confronted with shifting business models and face several strategic choices:
• How can top telecom companies manage
intermodal competition between cellular,
traditional landline, and cable TV services?
• How should leading telecommunication
companies move from a time division
multiplexing (TDM)-based network to
an Internet protocol (IP)-based one? This
question is especially critical for wireless
and traditional wireline players.
• How can incumbent telecommunications
companies adapt their strategy to the new
reality of competing in a global market
with rapidly evolving competitors such as
Google, Amazon, and Facebook?
• How can telecom companies best manage a
complex and increasingly obsolete regulatory environment that was designed around
the industry and technology of the past?
2
To understand these strategic choices, we
must first look briefly at the industry’s development and how leading telecommunications
companies met earlier challenges. Historian
David Thelen said, “The challenge of history is
to recover the past and introduce it to the present.” The history of the telecom industry and,
in particular, two of its largest players tells the
story of outcomes that resulted from strategic
choices. This history is important because it
created a set of deeply ingrained institutional
beliefs and behaviors that were not appropriate
in the context of new competitive realities. As
a result, companies struggled, and some made
poor decisions about how to approach new
business realities.
Viewed from the perspective of the three
rules described by Michael Raynor and
Mumtaz Ahmed, these historical outcomes
provide useful lessons for current industry
participants. Companies that learned from
these mistakes and persisted with an approach
consistent with the three rules were the ones
that turned in exceptional performance.
The Three Rules: How
Exceptional Companies Think
Research conducted across industries,
described in The Three Rules: How Exceptional
Companies Think, shows that the most successful enterprises are those that continually search
for and find ways to create new value—that
is, value that is not price-driven—and in the
process, pursue growth.1 Examining the study’s
most consistently successful businesses, the
researchers distilled three rules that drive longterm superior performance (see the sidebar
“About The Three Rules”). The three rules are:
1) Better before cheaper: Don’t compete
on price; compete on value.
How the three rules shaped the telecommunications industry
ABOUT THE THREE RULES
More than five years ago, Deloitte launched the Exceptional Company research project to
determine what enabled companies to deliver exceptional performance over the long term.
Adopting a uniquely rigorous combination of statistical and case-based research, this project has
led to over a dozen publications in academic and management journals, including the Strategic
Management Journal, Harvard Business Review, and Deloitte Review.2 The fullest expression of
this work to date is in The Three Rules: How Exceptional Companies Think (www.thethreerules.
com).3
The project studied the full population of all publicly traded companies based in the United States
at any time between 1966 and 2010, encompassing more than 25,000 individual companies and
more than 300,000 company-years of data. Performance was measured using return on assets
(ROA) in order to isolate the impact of managerial choices: Measures such as shareholder returns
often confound company-level behaviors with changes in investor expectations.
Using a simulation model, the researchers estimated how well each company “should” have
done given its industry, size, life span, and a variety of other characteristics. They then compared
this theoretical performance with how well each company actually did. A company qualified as
“exceptional” if it surpassed its expected performance by more than population-level variability
would predict.
Not all exceptional companies are equally exceptional, however. The researchers identified
“Miracle Workers,” or the best of the best, and “Long Runners,” companies that did slightly less
well but still better than anyone had a right to expect. In the entire database, there were 174
Miracle Workers and 170 Long Runners.
To uncover what enabled these companies to turn in this standout performance over their
lifetimes, the researchers compared the behaviors of Miracle Workers and Long Runners with
each other and with “Average Joes,” companies with average lifespan, performance level, and
performance volatility.
First, to understand the financial structure of exceptional companies’ performance advantages,
the researchers pulled apart their income statements and balance sheets. This provided invaluable
clues: Miracle Workers systematically rely on gross margin advantages, and very often tolerate cost
and asset turnover disadvantages. In contrast, Long Runners tended to rely on cost advantages
and lean on gross margin to a far lesser extent.
Then, detailed case study comparisons of trios—a Miracle Worker, Long Runner, and Average
Joe—in nine different sectors revealed the causal mechanisms behind these financial results.
Specifically, exceptional performance hinged on superior non-price differentiation and higher
revenue, typically driven by higher prices. Nothing else seemed to systematically matter; in fact,
exceptional companies seemed willing to change anything, and sometimes just about everything,
about their businesses in order to sustain their differentiation and revenue leads.
Hence, the three rules:
1)
Better before cheaper: Don’t compete on price; compete on value.
2)
Revenue before cost: Drive profitability with higher volume and price, not lower cost.
3)
There are no other rules: Do whatever you have to in order to remain aligned with the first
two rules.
3
From monopoly to competition
2) Revenue before cost: Drive profitability with higher volume and price, not
lower cost.
3) There are no other rules: Do whatever you have to in order to remain aligned
with the first two rules.
Telecom Miracle Workers
and Long Runners
It is well established that industry effects
have a material impact on corporate-level
performance. Any attempt to compare the
performance of companies, and understand
the impact of behavior on performance, must
therefore control for these effects. In large-scale
research, industry categorization schemes such
as the Standard Industrial Classification (SIC)
or the Global Industry Classification Standards
(GICS) are often used. The findings reported in
The Three Rules relies on the SIC system.
Finer-grained case study analysis of specific
industries can sometimes require a qualitative
analysis in order to capture material differences
within these code-based industry categorizations. Such is the case for telecommunications. Based on what we believe to be the
most relevant analysis of the industry’s major
Figure 1. Summary of top telecom performers
Ranking
Major
players
• Two Long
Runners
• Five Miracle
Workers
Source: Deloitte analysis.
Rural
carriers
• Eight Long
Runners
Small
wireless
• Long Runner
No. of
companies
2
Examples
Comments
• AT&T
• Consolidated
wireline and invested
in wireless
• Verizon
13
• Miracle Workers
include:
– New ULM (now NU
• ILEC origins
Telecom)
– North Pittsburgh (now
part of Consolidated
Communications)
– Ntelos Shenandoah
1
• U.S. Cellular
• Other small
wireless companies
ended up as part
of AT&T or Verizon
Graphic: Deloitte University Press | DUPress.com
For the Three Rules analysis, companies are classified based on their time-varying four-digit SIC. A
Miracle Worker is a company that has had enough 9th-decile ROA performances over its lifetime such that it would
be statistically unlikely that the company would be able to achieve its performance profile through luck alone.
A Long Runner is a company that has had enough 6th- to 8th-decile ROA performances over its lifetime such
that it would be statistically unlikely that the company would be able to achieve its performance profile through
luck alone. For example, a company with eight years of data would require eight 9th-decile performances to be
considered a Miracle Worker, and a company with 42 years of data would require 17 9th-decile performances to
be considered a Miracle Worker at a Miracle Worker probability threshold of 99.8 percent.
4
How the three rules shaped the telecommunications industry
players, AT&T and Verizon appear to meet
our criteria for Long Runners, while a number of smaller companies qualify as Miracle
Workers and Long Runners—rural incumbent
local exchange carriers (ILECs), smaller wireless companies, and niche players (see figure
1). This is probably because most superior
performers have so far focused on only one of
the rules—revenue before cost—paying limited
attention until the last 10–15 years to establishing non-price differentiation (better before
cheaper).
Other industries have seen many Miracle
Workers derive their sustaining advantage
from a significant difference in return on sales
(ROS), but to date there has been relatively
modest ROS spread in the telecom industry.
This is changing, especially in the wireless
business, where AT&T and Verizon, the two
largest US carriers, clearly lead. Today, they are
growing revenues, differentiating their products, investing heavily, and focusing on better
before cheaper.4
Consistent with this research, we find that
the dramatic shifts in the telecommunications
firmament created opportunities for growth
that only a few firms have been able to execute
on over the long term. The history of the
industry shows us that those that survived—
and thrived—followed the three rules as they
navigated two major transitions:
• The advent of competition
• The entry of cable and satellite plus
the shifts from voice to data and wired
to wireless
The advent of competition
For most of the first 100 years of their
history, wireline and long-distance telecom
companies could not apply the three rules.
The highly regulated nature of the industry meant that, during this period, investors were guaranteed a return, the customer
was guaranteed affordable service, and the
telecom employee was provided with fairly
secure employment. The process involved the
industry submitting capital plans for services
or service extension to the regulatory bodies, with the regulator generally choosing the
lowest investment option and then setting
the appropriate phone prices to deliver the
regulated return. Thus, investment decisions
and pricing were not under the control of the
telecommunications provider.
Two major events changed this: the 1984
breakup of AT&T Corp. and the passage of
the 1996 Telecommunications Act. The 1984
breakup of AT&T Corp. opened up competition in the long-distance (IXC) market. By the
early 1980s, AT&T Corp. had grown into a
vertically integrated telecom company providing local ILEC and long-distance wireline
services. The company faced a US government
antitrust suit, the resolution of which required
the separation of the Bell System IXC from
its Bell operating companies (BOCs).5 The
breakup of AT&T formalized competition in
the interstate and interexchange services. In
its aftermath, IXCs moved from operating in a
complex and heavily regulated environment to
market-based competition and pricing, albeit
with extensive rules. Three primary IXC players emerged: AT&T, MCI, and Sprint.
Even after the breakup of AT&T, the ILEC
market remained monopoly-based, composed
of two larger independents (GTE and Sprint/
United Telecom); small, typically rural companies; and the seven former AT&T BOCs
(the “Baby Bells”: Ameritech, Bell Atlantic,
Pacific Telesis, Bell South, NYNEX, SBC, and
US West). The 1996 Telecommunications
Act allowed ILECs to enter the long-distance
IXC market and compete with each other in
exchange for removing their local monopolies.6
In just over a decade, companies in both the
ILEC and IXC markets moved from operating
in a complex and heavily regulated environment to market-based competition and pricing, though with extensive oversight.7 After a
lengthy period of stable returns, these companies had to learn how to find and retain customers in a series of price-cutting battles that
eroded margins. For most, the early days of
deregulation were the antithesis of better before
5
From monopoly to competition
cheaper and revenue before cost. The move by
ILECs into the IXC market based on low prices
with a limited set of services can be described
as cheaper before better. Customers benefited
from the price-cutting, but as figure 1 shows,
wireline industry revenues and profits collapsed. However, as we will discuss, two “Baby
Bells”, Bell Atlantic and SBC made sequential
acquisitions—a revenue before cost strategy
that positioned them for success in the coming
wave of voice, data, and wireless innovations.8
New technologies: Cable,
satellite, data, and wireless
During the 11-year period between 2002
and 2013, the industry experienced a dramatic
shift in technology from voice-oriented wired
TDM (time-division multiplexing) services
delivered over copper circuits to data-driven
IP-based services delivered over wireless and
fiber-rich networks.9 These new technologies
captured ever-larger telecom revenue share. In
2002, the US telecommunications industry’s
gross revenues were $385 billion (including
cable and satellite TV), and its net revenues
(after interconnection costs, program content,
and handset subsidies) were $315 billion (see
figure 2).
By 2013, wireline gross and net revenue
both had fallen by more than 50 percent compared to 2002, declines that were more than
offset by gains from wireless, cable, and DBS.
It was during this period of growth that AT&T
and Verizon began to pursue better before
cheaper and revenue before cost strategies,
particularly in the wireless segment and in TV
distribution with new products such as Uverse
(AT&T) and FiOS (Verizon). While these
investments required both carriers to make
Figure 2. 2002 and 2013 US telecommunications and content distribution revenue
($ billion)
350
316
300
250
226
222
200
185
163
150
139
130
107
100
50
0
2002
2013
Consumer
n DBS
2002
2013
Consumer net
n Cable and other
2002
2013
Business
n Wireless
2002
2013
Business net
n Wireline
Sources: 2002 Annual Reports for Verizon, MCI/WorldCom, Alltel, SBC, AT&T Corp., BellSouth, AT&T Wireless,
Cingular, CenturyLink, Qwest, Embarq, Sprint, Nextel, T-Mobile, TDS/USCC, Frontier, Windstream, DirecTV, Dish,
CableVision, Comcast, TWC, Adelphia, Charter; 2013 Annual Reports for Verizon, AT&T, CenturyLink, Sprint,
T-Mobile, TDS/USCC, Frontier, Windstream, DirecTV, Dish, CableVision, Comcast, TWC, Charter; Deloitte analysis.
Graphic: Deloitte University Press | DUPress.com
6
How the three rules shaped the telecommunications industry
extensive reinvestments in the network and
products, the market results have been positive
and their investments in fiber will have value
for a long time.10 However, in the rest of the
wireline consumer segment and the business
market, the two companies have followed a
more price-focused approach with limited new
areas in the portfolio.
The rise of AT&T and Verizon
AT&T and Verizon made investments in
wireless and new fiber networks, and moved
from the voice-centric to the data-centric
world. The progression of these two companies
from medium-sized regional providers with a
narrow product set to major industry players
with a full range of telecom services was largely
achieved by following the three rules. As the
industry became competitive, the precursors
of both companies (SBC and Bell Atlantic)
initially used low prices to attract customers of
the IXCs. But by the late 1990s, both companies adopted the revenue before cost strategy
of expanding into new geographies. They also
sought new technologies that helped create differentiated, value-based products—for example, in data and wireless. Using a revenue before
cost acquisition strategy and organic growth,
SBC (the predecessor of AT&T, Inc.) grew its
revenue from $13 billion to $129 billion, and
its enterprise value from $30 billion to $250–
260 billion between 1993 and 2013.11 Between
1996 and 2003, SBC delivered top two-decile
ROA performances.12 SBC was also in the top
four deciles almost every year between 1985
and 2003. Even in more recent times, AT&T
has delivered a much higher ROS than most of
its peers (including Verizon), largely due to its
wireline performance and business mix.13
Both companies’ wireless businesses are
examples of better before cheaper—providing an increasing array of services and geographic coverage. AT&T and Verizon have
also followed a revenue before cost approach,
moving into new markets such as wireless,
broadband data, and video distribution and
therefore carving out leading market positions.
Both companies have shifted to a better before
cheaper approach with their wireless businesses
and new consumer broadband investments
(FiOS and Uverse) built around fiber-rich IP
networks; these incorporate advanced IPTV
capabilities that meet consumer demand for
a feature-rich, multimedia TV, telephone,
and Internet experience. Interestingly, in this
case the two companies have taken similar
approaches, focusing on the US market and
investing heavily in new assets.
ABOUT DECILES
Decile values range from 0 to 9. A company’s
decile rank is its relative performance in that year.
A company with a rank of 0 is in the bottom 10
percent of all publicly traded companies, and
one with a rank of 9 is in the top 10 percent.
To calculate these ranks, we used a statistical
technique called quantile regression and included
controls for market share, size, industry, year,
leverage, number of observations, and level
of competition.
7
From monopoly to competition
The first step: Revenue
before cost
Expanding geographic footprint
by acquiring competitors
B
OTH AT&T and Verizon embraced a revenue before cost strategy early, expanding
their footprints by acquiring other Baby Bells
that were struggling due to wireless substitution, cable competition, and resale-based competition that squeezed margins. The companies
started as local exchange carriers—SBC and
Bell Atlantic (two of the seven Baby Bells)—
after the 1984 breakup of the AT&T system.
SBC acquired Pacific Telesis, Ameritech, SNET,
Bell South, and the post-divestiture AT&T
long-distance business. Bell Atlantic acquired
NYNEX, then merged with GTE to form
Verizon, then subsequently acquired MCI (see
figure 3).14
Figure 3. Verizon and AT&T growth by acquisition
Revenue ($ billion)
Revenue ($ billion)
160
Verizon
140
160
$21
($9)
$22
120
AT&T
140
$19
$21
($20)
$121
120
$15
$13
100
80
80
60
60
40
$10
$33
$34
$1
Dobson: 2007
$57
Cingular: 2006
100
$129
($19)
40
$9
20
Wireline
Sources: 1996–2013 annual reports for AT&T/SBC; 1996–2013 annual
reports for AT&T and Verizon; Deloitte analysis.
8
$1
Wireless
AT&T: 2013
Organic growth
Bell South: 2006
AT&T: 2005
0
Ameritech: 1999
Verizon: 2013
Organic growth
MCI: 2004
GTE disposals
GTE: 1999
NYNEX: 1996
Alltell: 2008
Wireless
Organic growth
Other: 1999
Cellco: 1999
BA Wireless: 1996
Bell Atlantic (BA): 1996
0
$14
Pactel: 1997
$1
Organic growth
$8
$13
Ameritech: 1999
20
SBC: 1996
$7
Wireline
Graphic: Deloitte University Press | DUPress.com
How the three rules shaped the telecommunications industry
All seven Baby Bells started at about the
same size, but a combination of stronger
market growth and a more generous regulatory environment in the south and southeast propelled SBC, Bell Atlantic, and Bell
South to outperform the others; by the late
1990s, they were the strongest of the Baby
Bells. Conversely, NYNEX (New York and
New England) and Pacific Telesis (Nevada
and California) were faring poorly in terms
of financial performance, although this
did not deter Bell Atlantic and SBC from
acquiring them.
Both Bell Atlantic and SBC followed up
with more expensive acquisitions of other
ILECs. SBC bought Connecticut ILEC SNET15
in 1998 and Ameritech (Midwest) in 1999.16
Bell Atlantic bought GTE the same year and
re-named itself Verizon after the deal closed.17
Thus, in the early 2000s, two major
telecom companies had emerged with significant footprints in regional wireline and
wireless communications:
• Verizon: Verizon was the amalgamation of
the two northeast Baby Bells with the largest independent (GTE), which also had a
controlling interest in Verizon Wireless—a
major cellular player with a strong base in
the US northeast and west. In the wireless
space, Bell Atlantic Mobile merged with
Vodafone Airtouch (the wireless assets of
Pacific Telesis and US West) and the wireless assets of GTE were added to create
Verizon Wireless. Later, Alltel was acquired,
and Verizon has recently bought out the
Vodafone minority to take full ownership of
the wireless company.18
• SBC: SBC was formed by the merger of
three major Bell companies covering the
central United States and the west coast.
SBC also grew its wireless business by
merging its own wireless assets (SBC and
Ameritech) with those of Bell South to
create Cingular.19
Acquiring new market
segments and technologies
For both companies, the next step was
to become national long-distance providers.
Historically, the Bell companies had been shut
out of much of the long-distance market—specifically, the interstate and inter-LATA (local
access and transport area) business. Both
SBC and Verizon developed a foothold in the
consumer and small business long-distance
markets, but were unable to grow organically
in the enterprise market and in more complex
services (for example, advanced voice and
data). Ultimately, however, financial stress
among the three main long-distance players—Sprint, MCI/WorldCom, and AT&T
Corp.—provided acquisition opportunities. In
January 2005, SBC acquired AT&T Corp. for
$16 billion, and in October of the same year,
the company changed its name to AT&T.20
After MCI emerged from bankruptcy protection, Verizon acquired it for $6.8 billion in
February 2005.21 With these two large acquisitions, SBC and Verizon became major players
in the enterprise communications business
and gained a full range of advanced voice and
data products.
The move into wireless
Today, the wireless industry is generally
regarded as one of the telecom industry’s great
successes over the last 25 years. That was not
always the case, and even as late as 2000, many
analysts thought that the wireless industry in
the United States would not deliver any value,
as investments were still larger than returns.
AT&T and Verizon continue to follow
Sprint’s lead by investing in their networks to
such an extent that they have attracted and
retained the majority of postpaid customers, as
shown in figure 5.
The wisdom of revenue before cost can
be seen by contrasting the history of AT&T
Corp. with that of Verizon near the turn of
the 21st century. At the end of 1999, AT&T
Corp.—before its acquisition by SBC—was
much larger than Verizon (then Bell Atlantic),
9
From monopoly to competition
SPRINT PCS: CREATING VALUE WITH THE FIRST NATIONWIDE NETWORK
Even companies that did not reach the threshold of superior performance have delivered value by
following the three rules. For example, in 1996, Sprint moved from being a regional cellular player
to a national PCS operator. It acquired national PCS licenses in 1994 and 1995, and spun off its
cellular business into 360° Communications in 1996. It created the first national network without
roaming charges and seamless connection. This better before cheaper approach created significant
shareholder value, with enterprise value rising from $18 billion in 1994 to around $100 billion
in 1999–2000. At the same time, Sprint delivered industry-leading asset turnover but rather low
ROS because it was investing heavily in growth. By 2005, other industry players had also evolved
into national operations and were investing heavily in network performance. From the mid-2000s,
AT&T and Verizon had gone national. They also pursued a better before cheaper approach, with
Verizon building on network quality and AT&T on a superior device (the iPhone®).22 Figure 4
shows the changing market share in the wireless industry between 2000 and 2012.
Figure 4. Share of wireless industry revenue
0.1%
13.3%
3.9%
9.3%
16.9%
2000
10.3%
2.4%
12.2%
28.5%
2005
12.9%
8.6%
5.9%
15.1%
31.1%
2012
26.7%
l Sprint
l Nextel
l T-Mobile
l Other
l AT&T
l Verizon
l Sprint
l T-Mobile
l Metro PCS
l Other
Voice-centric
2000–2005: Expanded coverage and
scale in advance of 3G
with revenues of $62.4 billion versus Verizon’s
$33.2 billion. But AT&T Corp. pursued a costreduction strategy and broke the company
into a number of business units in pursuit of
efficiency. Its 1999 annual report states: “In
order to become truly competitive, we must
become the low-cost provider in the industry,
and therefore, we are continuing our efforts to
reduce our cost structure.”23
In 1999, AT&T Wireless earned $7.6 billion in revenue from 12 million subscribers,
35.4%
l AT&T
l Verizon
l Sprint
l T-Mobile
l Metro PCS
l TracFone
l Other
Data-centric
2005–2012: Addressed capacity, funding, and
spectrum issues to handle data traffic growth
Sources: 2000 annual reports for AT&T, Cingular, Verizon, Sprint, Nextel,
T-Mobile, USCC; 2005 annual reports for AT&T, Verizon, Sprint, T-Mobile,
MetroPCS, USCC; 2012 annual reports for AT&T, Verizon, Sprint, T-Mobile,
MetroPCS, USCC, TracFone; Deloitte analysis.
10
9.3%
26.6%
24.9%
l AT&T
l Cingular (SBC)
l Cingular (Bell South)
l Verizon
2.2% 4.5%
Graphic: Deloitte University Press | DUPress.com
compared to Verizon’s $4.6 billion from 12
million wireless subscribers. However, in
contrast to AT&T, Verizon pursued a revenue
before cost strategy and merged with GTE and
Airtouch, while AT&T Corp. separated itself
into divisions that were publicly traded or had
tracking stocks. By 2000, Verizon’s revenue of
$65 billion almost matched AT&T’s $66 billion,
and Verizon had created a much bigger wireless business with 27.5 million subscribers and
$14.2 billion in revenue versus AT&T Corp.’s
How the three rules shaped the telecommunications industry
Figure 5. Higher margins in wireless translate into customer acquisition and retention
% US wireless industry
Revenue
39%
EBITDA-CAPEX
32%
28%
Capital expenditures
($ billion)
2007–2012 total CAPEX
Net subscriber
additions (millions)
2007–2012 net adds
4
9%
48
61%
67%
72%
91%
$47.5
$46.4
21
$47.3
14
-11
2007 2012
l AT&T
and Verizon
2007 2012
AT&T
Verizon
l Other
Other
carriers
AT&T
Other
and Verizon
l Postpaid
l TracFone
l Prepaid
carriers
Sources: 2007 annual reports for AT&T, Verizon, Sprint, T-Mobile,
MetroPCS, Leap Wireless, Clearwire, USCC, TracFone; 2012 annual reports
for AT&T, Verizon, Sprint, T-Mobile, MetroPCS, Leap Wireless, Clearwire,
USCC, TracFone; Deloitte analysis.
Graphic: Deloitte University Press | DUPress.com
15.2 million subscribers and $10.5 billion
in revenue.24
Faced with a number of challenges, including ILEC entry and massive price reductions in
the long-distance business, technology migration challenges in the wireless business (from
TDMA to GSM), international challenges such
as the losses in AT&T Canada, and limited
ability to invest in 2004, AT&T Wireless put
itself up for sale and was acquired by Cingular
in October 2004.25 Meanwhile, AT&T Corp.
itself—the long-distance and business services parent company—was sold to SBC in
2005, with SBC subsequently adopting the
AT&T name.
AT&T and Verizon were now in similar
positions. They both owned significant local
exchange assets, a major IXC/enterprise business, and a majority stake in one of the two
largest wireless carriers. These changes coincided with the broader shift in the industry
from wireline to wireless, evidence of which
can be seen in the AT&T and Verizon results
shown in figures 6 and 7, which recreate each
company on a like basis (for example, data for
2000 covers the same set of businesses that
each company had in 2013.)
11
From monopoly to competition
Figure 6. Verizon performance, 1999–2013
($ billion)
150
n Wireless
n Wireline
125
$120
100
$96
$17
75
$81
50
$79
25
$43
$39
$28
$6
$34
$39
$33
$9
0
1999 2013
Revenues
1999 2013
EBITDA
Sources: 1999 annual reports for Verizon, WorldCom MCI, Alltel;
2013 annual report for Verizon; Deloitte analysis.
$17
$14
$3
$25
$3
1999 2013
EBITDA-CAPEX
Graphic: Deloitte University Press | DUPress.com
Figure 7. AT&T performance, 2000–2013
($ billion)
150
$129
125
n Wireless
$129
n Wireline
$24
100
$70
75
$105
$49
50
25
$6
$59
$43
0
2000 2013
Revenues
$25
$26
$17
$21
2000 2013
EBITDA
Sources: 2000 annual reports for SBC, AT&T Corp.,
BellSouth; 2013 annual report for AT&T; Deloitte analysis.
12
$42
$5
$21
$14
$7
2000 2013
EBITDA-CAPEX
Graphic: Deloitte University Press | DUPress.com
How the three rules shaped the telecommunications industry
The second step: Better before
cheaper
H
AVING followed Sprint in creating
national wireless operations—with the
benefits of a standard, seamless network with
no roaming charges—AT&T and Verizon
applied better before cheaper slightly differently.
Verizon has focused on network quality—
voice, text messaging, and data usage—and has
received industry recognition for its efforts.
In the J. D. Power 2013 US Wireless Network
Quality Performance StudySM, Verizon Wireless
was the first wireless provider since 2004
to rank highest across all six regions of the
United States.26
AT&T chose to differentiate itself based on
a combination of its data network and a new
device—the iPhone, a product that clearly
attempted to position itself as better before
cheaper. When the iPhone was launched on
June 29, 2007, it cost $499 or $599 depending on the model, compared with the $199
Blackberry Pearl (at that time one of the most
expensive smartphones), but it added a whole
new capability—the Internet experience on
a mobile device.27 The iPhone’s availability
created an environment where customers
were willing to spend much more on wireless
services to have access to mobile Internet. This
additional spending allowed AT&T to invest
heavily in network performance.28
Lessons learned: Cheaper DSL
While AT&T and Verizon were successful in expanding their footprint and service
mix, neither company followed the better
before cheaper mantra in their attempts to
offer cheaper inferior broadband with DSL.
In 2000–2001, DSL was a competitive product with cable modems, but it was unable to
keep up with the speed gains that cable could
offer. Left with an inferior product, AT&T and
Verizon responded by pricing it significantly
below cable, a strategy that both companies
eventually abandoned—underscoring the cost
of deviating from the three rules.29
13
From monopoly to competition
The third step: There are no
other rules
T
HE wide range of approaches explored by
telecom companies—and the decidedly
mixed results—highlights both the promise
and limitation of the third rule: There are no
other rules. Telecom companies have been
willing to explore many new avenues, but
unless their actions are in the service of the
first two rules, they are more likely than not
to result in inferior performance. The sector
has seen forays into international expansion
(Bell South and others) and diversification (the
legacy AT&T long-distance company getting
into cable TV, equipment manufacturing with
Lucent and NCR, and other businesses), but
these efforts have failed to yield statistically
significant improvements. Thus, horizontal
acquisitions have been the main focus of telecommunications players, as shown in figure 8.
But increasingly, companies in the industry
appear to be applying the rules. AT&T and
Verizon are investing in replacing their landline product sets with fiber-based IP products,
Figure 8. Growth for telecom operators in particular is over-indexed on horizontal acquisitions
n International
n Domestic
Revenue ($ billion)
80
20
70
Others
India
Others
Rest of Asia
Africa, CE
Other Europe
Spain
35
Thailand
CE
Other Nordic
10
Italy
Sweden
1999
2009
1999
Vodafone
Significant
acquisitions
40
Poland
Spain
UK
0
2009
Telenor
Deal size
($ million)
Year
1999
Mannesmann–Germany $181,491
2000
2000
Swisscom–Switzerland
$2,576
2001
2001
Japan Telecom–Japan
$5,308
2003
2002
Cegetel
(Vivendi)–France
2007
Hutchison Essar–India
Year
Others
20
Germany
0
60
$6,773
2005
$11,100
2005
Significant
acquisitions
United Comm.–
Thailand
Pannon GSM Ltd–
Hungary
Sonofon–Denmark
B2 Broadband AB–
France
Vodafone Sverige–
Sweden
1999
2009
France Telecom
Deal size
($ million)
Year
$719
2000
Orange–UK
$878
2000
Equant NV–Netherlands
$3,893
$500
2005
Auna Operadores–
Spain
$7,704
Significant
acquisitions
Deal size
($ million)
$37,519
$822
$1,161
Sources: 1999 Annual Reports for Vodafone, Telenor, France
Telecom; 2009 Annual Reports for Vodafone, Telenor, France
Telecom; Factiva; Deloitte analysis.
Graphic: Deloitte University Press | DUPress.com
14
How the three rules shaped the telecommunications industry
substantially changing their positions in the
consumer market. While these shifts face
significant regulatory hurdles, both companies
appear committed to this approach. Their consumer products have evolved from the cheaper
before better approach of offering consumer
broadband through DSL to the better before
cheaper offerings of IP-based FiOS and Uverse.
FiOS (Verizon) and Uverse (AT&T) seek to
provide the next generation of television,
telecommunications, and high-speed Internet.
Their aim is to win customers from cable and
satellite providers by providing a multimedia
TV, telephone, and Internet experience. The
key product is high-speed Internet access,
although the nature of household purchasing means that a bundle of three services
(voice, data, and video) needs to be provided.
Conversely, their investments in better before
cheaper, such as IPTV, have stemmed revenue
decline in their consumer businesses, even
though deployment is limited.30 AT&T is in the
process of acquiring DirecTV, which will allow
the company to add national video services
to its national wireless services and gives it a
stronger line-up of unique video content.31
The difference in results between AT&T
and Verizon’s copper-based DSL services and
their fiber-based Uverse and FiOS services can
be seen in figure 9.
Figure 9. Telecom DSL and fiber versus cable
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
-10%
Share of net adds (b)
Price or speed relative to cable (a)
100%
-10%
2000
DSL speed
2002
FTTX speed
2004
DSL price
2006
FTTX price
2008
2010
DSL share of net adds
2012
-20%
FTTX share of net adds
(a) Comcast, TWC, Cablevision
(b) Share of net adds is defined as the net change in subscribers divided by total consumers in the market during the year.
Sources: FCC, “2013 measuring broadband America February report: A
report on consumer wireline broadband performance in the U.S.,” February
2013, http://www.fcc.gov/measuring-broadband-america/2013/February;
Deloitte analysis.
Graphic: Deloitte University Press | DUPress.com
15
From monopoly to competition
Applying the three rules today
Amazon is working in the adjacent cloud
infrastructure space, while Google is building
cloud capabilities and new applications that
are network-agnostic. Telecommunications
carriers are fighting back with a threepronged strategy:
G
OING forward, a new form of competition is emerging, with adjacent players
vying for carriers’ revenues. This is evident in
the wireless industry, where handset and other
ecosystem players are capturing an increasing
share of revenue (figure 10). Companies such
as Amazon and Google have invested heavily in infrastructure; Amazon Web Services
is a clear competitor for many telecom offerings, and Google is even building fiber to the
home (in Austin and Kansas) using newer and
faster architectures.32
Google and Amazon are using new technologies and approaches to enter the market.
• Building superior network capabilities
• Investing in select end-user areas (such as
telematics and video)
• Enabling companies in adjacent spaces
to gain
Figure 10. Payment and retention of customer spend
(wireless industry total in $ billion)
$350
9
7
13
7
28
$250
76
$200
18%
$156
4
3
$150
$100
$50
2006-2013 CAGR
$257
$300
4
26
3.5%
$61
9
61
52
149
126
213
161
Retained by
Billed by
Retained by
Billed by
Retained by
$0
Billed by
2000
n Carrier
2006
n Phone devices
n Non-phone
devices
2013
n Apps and OS
Sources: 2000 annual reports for AT&T, Verizon, Sprint, T-Mobile, USCC; 2006 annual reports
for AT&T, Verizon, Sprint, T-Mobile, Alltel, USCC, Motorola, Apple, Google, Microsoft, Nokia,
Research in Motion; 2013 annual reports for AT&T, Verizon, Sprint, T-Mobile, USCC, Apple,
Google, Microsoft, Nokia, Research in Motion; Deloitte analysis.
Graphic: Deloitte University Press | DUPress.com
16
How the three rules shaped the telecommunications industry
The competitive environment in the landline
segment is similar, with systems integrators and cloud service players competing for
business using a better before cheaper strategy.
These over-the-top types of services are using
new IP data access services to create new
service sets and value-added solutions (for
example, corporate 1-800 solutions) that were
traditionally the preserve of telecommunications carriers and built into the fabric of the
network. Traditional telecom companies are
responding by making investments in new
areas. Verizon, AT&T, and others are creating
a series of network APIs (application program
interfaces) and investing in cloud services,
system integration, outsourcing, and content
distribution.33 At first glance, this looks like
a pure revenue before cost approach because
they are investing in new areas with emerging
business models. However, these companies
are also evolving their wireless networks from
a best-efforts approach (where the subscriber
received whatever performance the network
had available) to a managed radio interface
(where subscribers can pay for minimum
performance levels), a clear better before
cheaper approach.
In response to competition from traditional
landline services, cable TV and wireless telecom companies are upgrading their wireline
networks to an all-IP capability, replacing the
older TDM technologies. Similarly, they are
accelerating the pace of investment in wireless network technologies. Telecom companies
are also shifting to software-defined networks
that allow for flexibility, lower operating
costs, and customer-specific configuration.
Finally, they have shifted from focusing on
a single technology (for example, wireless
or copper) to an approach that is based on
multiple technologies.
In moving from TDM to IP, telecom companies should also follow a “three rules”
approach, switching to IP quickly and then
rapidly removing TDM assets. This is a revenue
before cost strategy and should be achieved by
reengineering the business around IP capabilities rather than adding them to the existing
TDM processes and systems. If the IP business
is designed around a new operating model, the
switch to IP can also constitute a better before
cheaper approach that can differentiate these
providers. This approach will require substantial investment, but if implemented correctly,
changing the operating model for sales,
provisioning, and customer care could enable
much lower operating costs, as many tasks currently performed by company staff can be done
online by customers. Doing this, however,
will require a completely different approach;
standardization will be important, and high
predictability, low variance, and low error rates
will need to be the norm.
Finally, telecom companies need to manage the
current complex—and increasingly obsolete—
regulatory environment to facilitate the change
to a multi-technology approach and a new
IP-based business model. While regulators see
the need to move to the new networks, they
have been slow to remove reporting requirements, regulations, and terms and conditions
that are more appropriate for the old networks
and processes. While telecom companies are
working to educate regulators, this shift may be
the most difficult one.
In summary, two major players have emerged
in the US telecommunications industry:
AT&T and Verizon, which together represent around 75 percent of the total industry’s
enterprise value ($485 billion of $660 billion).34 They have shifted from being regulated,
single-technology, regional- and local-access
providers to national, multi-technology
telecommunications service providers. They
have done so by pursuing growth in new
technology areas (mainly wireless and fiberrich broadband networks), and they have
tried to take a better before cheaper approach
in the delivery of these services. This has not
been without pain, but since the late 1990s,
these companies have transformed dramatically. In the future, they will need to continue
17
From monopoly to competition
tackling competition from other cable, wireless, and wireline providers as well as carve out
new positions against adjacent (OTT-based)
competitors, even as they transform their
networks again from TDM to IP and move the
regulatory framework.
In the next few years, we expect to see telecom companies win through a mixture of
better before cheaper and revenue before cost
approaches. Better before cheaper approaches
are likely to center around superior bandwidth, latency, and throughput on broadband
products, as well as the delivery of unique
customer experiences through the aggregation of a company’s own capabilities and the
integration/aggregation of capabilities of other
firms. Revenue before cost approaches, on the
other hand, will probably center on offering
a broader scope of services in an integrated
fashion and creating and selling new solutions
to existing customers.
In the future, we expect to see companies win
through a mixture of better before cheaper and
revenue before cost approaches:
• Better before cheaper probably
centering around:
–– Superior bandwidth, latency, and
throughput on broadband products
–– Unique customer experiences through
the aggregation of a firm’s own capabilities and the integration/aggregation of
the capabilities of other firms
• Revenue before cost approach probably
centering around:
–– Offering a broader scope of services in
an integrated fashion
–– Creating and selling new solutions to
existing customers
Deloitte’s telecommunications group is part of the Deloitte US organization’s Technology, Media,
and Telecommunications practice. This practice includes more than 1,400 technology, media
and entertainment, and telecommunications clients in the United States alone, including the vast
majority of market category leaders across all sector segments, and serving companies across
multiple sub-sectors including wireless, wireline, and equipment manufacturing. In the United
States, we serve the top five wireline companies, the top five wireless companies, the top five
equipment manufacturing companies, and four of the top five satellite companies.
18
How the three rules shaped the telecommunications industry
Endnotes
1. Michael E. Raynor and Mumtaz Ahmed,
The Three Rules: How Exceptional Companies
Think (New York: Penguin Books, 2013).
2. See Deloitte University Press, “The Exceptional
Company,” http://dupress.com/collection/
the-exceptional-company/ for more.
3. Raynor and Ahmed, The Three Rules.
4. AT&T ROS 26 percent (2013 annual report:
2013 wireless revenue and segment income),
Verizon ROS 32 percent (2013 annual report:
2013 wireless revenue and segment income).
5. AT&T and Western Electric Company
versus the United States modified final judgment, August 4, 1982, Action
82-0192. A copy can be found at http://
web.archive.org/web/20060830041121/
http://members.cox.net/hwilkerson/documents/AT&T_Consent_Decree.pdf.
6. Telecommunications Act of 1996, Pub.
LA. No. 104-104, 110 Stat. 56 (1996),
http://transition.fcc.gov/telecom.html.
7. Telecommunications Act of 1996, Pub.
LA. No. 104-104, 110 Stat. 56 (1996),
http://transition.fcc.gov/telecom.html.
8. HBR, “How to fight a price war,”
March 2000, http://hbr.org/2000/03/
how-to-fight-a-price-war/ar/1.
9. The Insight Research, “US wireless &
wireline voice: Threats and opportunities,”
February 2014, http://www.insight-corp.com/
ExecSummaries/usvoice13ExecSum.pdf.
10. AT&T, “AT&T U-verse timeline,” http://
www.att.com/Common/merger/files/
pdf/U-verse%20Timeline41907.pdf;
Verizon, “History of Verizon Communications, Inc.,” p. 5, http://www.verizon.
com/investor/DocServlet?doc=verizon_
corp_history_oct_2013.pdf.
11. AT&T/SBC 1993 and 2003 annual report,
S&P Capital IQ/Compustat company
metrics, accessed July 15, 2014.
12. A company’s decile rank is its relative performance in that year. A company with a rank
of 0 is in the bottom 10 percent of all publicly
traded companies, and the one ranked 9 is in
the top 10 percent. To calculate these ranks,
we used a statistical technique called quantile
regression, and included controls for market
share, size, industry, year, leverage, number
of observations, and level of competition.
13. AT&T’s average ROS from 2003 to 2013
was 11.6 percent. Verizon’s average ROS
during the same period was 5.7 percent.
14. Verizon, “Verizon corporate history,” http://
www.verizon.com/investor/corporatehistory.htm, accessed June 30, 2014; AT&T,
“Milestones in AT&T history,” http://
www.corp.att.com/history/milestones.
html, accessed June 30, 2014.
15. Zdnet, “SBC in $4.4B merger with Snet,”
January 5, 1998, http://www.zdnet.com/news/
sbc-in-4-4b-merger-with-snet/98085, accessed
April 21, 2014; SNET is being sold to Frontier
Communications, AT&T, “AT&T announces
plans to sell Connecticut Wireline Operations
to Frontier Communications for $2.0 billion,”
December 17, 2013, http://www.att.com/gen/
press-room?pid=25160&cdvn=news&newsart
icleid=37344&mapcode=corporate|financial#
sthash.YscGoSLl.dpuf accessed June 25, 2014.
16. CNNMoney, “SBC dials up AmeriTech:
In ‘national-local’ approach to phone biz,
Baby Bells unveil $62B mega-deal,” May 11,
1998, http://money.cnn.com/1998/05/11/
deals/sbc/, accessed April 21, 2014.
17. The joint proxy statement can be found
at http://www.sec.gov/Archives/edgar/
data/732712/0000950130-99-002155.txt.
18. Verizon, “Corporate history,” http://www.
verizon.com/investor/corporatehistory.htm,
accessed June 30, 2014; Verizon, “Verizon
completes acquisition of Vodafone’s 45 percent
indirect interest in Verizon Wireless,” http://
newscenter.verizon.com/corporate/newsarticles/2014/02-21-acquisition-of-vodafonestake-in-vzw-complete/, accessed July 7, 2014.
19. John Borland, “BellSouth, SBC coin “Cingular”
wireless venture name,” CNet, http://news.cnet.
com/BellSouth,-SBC-coin-Cingular-wirelessventure-name/2100-1033_3-246656.html.
19
From monopoly to competition
20. AT&T, “AT&T, SBC to acquire AT&T:
Creates premier, global provider for new
era of communications,” January 31, 2005,
http://www.att.com/gen/press-room?pid=
4800&cdvn=news&newsarticleid=21566,
accessed June 25, 2014; AT&T, “SBC Communications to adopt AT&T name,” October
27, 2005, http://www.att.com/gen/pressroom?pid=7368, accessed June 25, 2014.
21. Wall Street Journal, “Verizon-MCI press
release,” February 15, 2005, http://online.wsj.
com/news/articles/SB110839040179353997,
accessed June 25, 2014.
22. iPhone is a trademark of Apple Inc., registered
in the United States and other countries. The
current report is an independent publication
and has not been authorized, sponsored,
or otherwise approved by Apple Inc.
23. American Telephone & Telegraph Co.,
SEC Form 10-K for the fiscal year ended
December 31, 1999, Section 13, MDA – Para
8, http://www.sec.gov/Archives/edgar/
data/5907/000000590700000014/000000590700-000014.txt).
24. Verizon Communications 10K filed March
20, 2002, http://www.sec.gov/Archives/edgar/
ata/732712/000095010902001438/000095010902-001438-index.htm, accessed July 7, 2014;
AT&T Communications 10K filed April 2,
2001, http://www.sec.gov/Archives/edgar/
data/5907/000000590701000012/000000590701-000012-index.htm, accessed July 7, 2014.
25. PR Newswire, “Cingular completes merger
with AT&T Wireless; creates nation’s largest carrier,” October 26, 2004, http://www.
prnewswire.com/news-releases/cingularcompletes-merger-with-att-wireless-createsnations-largest-carrier-74400697.html.
26. JD Power, “Overall network problem
rates differ considerably based on type
of service,” August 20, 2013, http://www.
jdpower.com/press-releases/2013-uswireless-network-quality-performancestudy-volume-2, accessed April 14, 2014.
27. CNNMoney, “iPhone mania hits flagship
stores,” June 29, 2007, http://money.cnn.
com/2007/06/29/technology/iphone/ accessed July 17, 2014; EveryMac.com, “Price
20
comparison of iPhone and Blackberry Pearl,”
http://www.everymac.com/systems/apple/
iphone/iphone-faq/iphone-compared-topalm-treo-750-motorola-q-and-blackberrypearl.html, accessed July 17, 2014.
28. Forbes, “AT&T binges on LTE buildout
chasing Verizon,” http://www.forbes.com/sites/
greatspeculations/2013/04/05/att-binges-onlte-buildout-chasing-verizon/, accessed July
7, 2014; Trefis, “AT&T continues acquisition
spree to meet LTE spectrum needs,” http://
www.trefis.com/stock/t/articles/148191/attcontinues-acquisition-spree-to-meet-lte-spectrum-needs/2012-10-12 accessed July 7, 2014.
29. Wall Street Journal, “Verizon decision to
cut DSL rates may put pressure on cable
firms,” http://online.wsj.com/news/articles/
SB10518964254511300, accessed July 7, 2014;
Wall Street Journal, “BellSouth shaves DSL
prices,” http://online.wsj.com/news/articles/
SB112182109535890282, accessed 7 July, 2014.
30. AT&T quarterly earnings releases, 2Q09-13;
Verizon quarterly earnings releases, 2Q09-13.
31. ATT Newsroom, “AT&T to acquire DirecTV,”
http://about.att.com/story/att_to_acquire_directv.html, accessed July 7, 2014.
32. Wall Street Journal, “Google to push its fiber
rollout on Comcast’s turf,” http://online.wsj.
com/news/articles/SB100014240527023042753
04579393213607379066, accessed
July 7, 2014; InformationWeek, “Amazon,
telcos will battle for cloud customers,”
http://www.informationweek.com/cloud/
infrastructure-as-a-service/amazontelcos-will-battle-for-cloud-customers/d/did/1109052?, accessed July 7, 2014.
33. Verizon News Center, “Verizon digital
media services launches online live video
service for broadcasters, content retailers,”
http://newscenter.verizon.com/corporate/
news-articles/2013/07-08-digital-mediaservices-launches-online-video-services/,
July 8, 2013; Wall Street Journal, “AT&T
opens the innovation doors to solution
providers,” http://online.wsj.com/article/PRCO-20130220-907428.html, February 20, 2013.
34. S&P Capital IQ /Compustat company
metrics, accessed July 15, 2014.
How the three rules shaped the telecommunications industry
Contacts
Craig Wigginton
US, Global, and Americas telecom sector leader
Partner
Deloitte & Touche LLP
+1 212 436 3222
[email protected]
Dan Littmann
US Consulting telecom sector leader
Principal
Deloitte Consulting LLP
+1 312 486 2224
[email protected]
Phil Wilson
Director
Deloitte Consulting LLP
+1 415 609 0561
[email protected]
21
Follow @DU_Press
Sign up for Deloitte University Press updates at DUPress.com.
About Deloitte University Press
Deloitte University Press publishes original articles, reports and periodicals that provide insights for businesses, the public sector and
NGOs. Our goal is to draw upon research and experience from throughout our professional services organization, and that of coauthors in
academia and business, to advance the conversation on a broad spectrum of topics of interest to executives and government leaders.
Deloitte University Press is an imprint of Deloitte Development LLC.
About this publication
This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related
entities (collectively the “Deloitte Network”) is, by means of this publication, rendering professional advice or services. Before making any
decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity
in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.
About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of
member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also
referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description
of DTTL and its member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With
a globally connected network of member firms in more than 150 countries and territories, Deloitte brings world-class capabilities and
high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than
200,000 professionals are committed to becoming the standard of excellence.
© 2014. For information, contact Deloitte Touche Tohmatsu Limited.