Over the past decade, significant changes in regulations, advances in technology, and shifts in competitive dynamics began transforming the cable industry. Companies within the industry were forced to adapt by acquiring economies of scale and scope. American Cable Communication was seeking to acquire AirThread Connections for three reasons. The two companies could help each other become more competitive in an industry that is moving toward bundled package service offerings. The acquisition would help both companies expand into the business market, and lastly American Cable was in a unique position to add value to AirThread’s operations. They could obtain a significant amount of …show more content…
Another weakness that ATC faces is the necessity to provide its customers with a bundling option. According to Stafford and Heilprin, the company lacks the ability, “to bundle its wireless service with other offerings such as landline telephony, internet access, and video services (AirThread Case).”
ACC Strategic Rationale
American Cable Communications’ acquired AirThread connections so together it can compete in the bundling services that their competitors were offering. ACC is not only a regional cellular provider, but can now supply video, internet, and landline telephony. Together ACC and ATC are able to produce an 802.16n standard for WiMAX that both companies were feeling pressure to create. The second reason ACC acquired ATC, because ACC did not have long-term service contracts. The long-term service contracts from ATC would increase stability and decreasing risk with ACC’s customer base. Another reason why ACC acquired ATC, because of ATC’s infrastructure would save ACC “more than 20% in backhaul costs”, and the savings will decrease the operating costs (AirThread Case). Lastly ATC can “obtain a significant amount of debt financing” for ACC (AirThread Case).
ATC Estimated Enterprise Value