Increasingly faced with competition for sales of telecommunications equipment and services in this country under Federal Communications Commission decisions of the past decade.American Telephones & Telegraph Co. is looking overseas for more of its future business growth.
For a century the dominant telephone company in the Unites States, AT&T faces an uncertain future in its traditional marketplace.
Giant industrial corporations such as International Business Machines Corp. want a stake in the future long-distance communications of computer data. Relatively small communications carriers such as MCI Corp. want to grow larger by acquiring intercity private-line and voice communications business. Non-Bell System manufacturers want a larger share of equipment sales.
All the while, the U.S. government is preparing a massive antitrust case for trial, seeking to break up AT&T - the largest private enterprise in history and owner of a Long Lines Department that operates interstate services: Western Electric Co., an equipment manufacturing firm: Bell Laboratories, a research business; and regional operating subsidiaries from coast to coast, including Washington-based Chesapeake & Potomac.
While competition for a relatively slow-growing but affluent American market, however, demand for telecommunications services around the globe is expected to soar.
Entire countries, for example, today are without extensive telephone systems. Iran alone will spend $15 billion in the next 10 years on telecommunications.
Even in such already developed international markets as the across the North Atlantic, between America and Europe. AT&T executives see nothing but growth in demand and potential revenues and profits.
Richard R. Hough, president of AT&T Long Lines and vice president of the overall corporation, said the number of telephone messages across the Atlantic is growing at a rate of 26 per cent or more a year. He also forecast an increasing need for data transmission abroad as businesses in various countries become more involved in multinational transactions.
Through an international subsidiary (America Bell International Inc.) and Western Electric, AT&T is showing a strong interest in gaining a share of this world telecommunications growth - both consulting services and equipment sales.
Saudi Arabia, for example, has picked Western Electric as prime contractor on a major project in that country - directing the engineering, furnishing and installation of 300 microwave radio relay stations at a cost of some $400 million.
In Iran, AT&T is involved in a potentially larger development. America Bell already has won a $30 million contract to plan Iran's multi-billion dollar system. And Western Electric can be expected to bid on a contract that involves 5 million civilian telephone lines where none exist today.
In an interview conducted by AT&T's "picturephone" service between Washington and his office in New Jersey, Hough emphasized that AT&T in earlier years has done international telecommunications consulting work. Systems have been planned in Africa and Southeast Asia by AT&T, often at the request of the U.S. government, he added.
But he conceded, "I think we will continue to do more of that sort of thing. Western Electric [WORD ILLEGIBLE] the Bell System will be more active."
Still, he forecast international operations will contribute only a "relatively small fraction" of overall AT&T revenues. One reason is the already established competition in world markets from International Telephone & Telegraph and big foreign electronics firms. In effect, AT&T is a new threat to them just as other firms are a threat to AT&T here.
More important, perhaps, was Hough's statement that he "would expect foreign profits to be greater" than on similar operations in this country.
"You have an ability to pick and choose contracts you want . . Western Electric can't pick and choose in the U.S.," Hough said.
Thus the international arena could be a source of more rapid growth in overall profitability for AT&T at a time when U.S. service profitability is controlled by regulatory agencies.
In 1976, total interstate and overseas telephone revenues of AT&T were about $10 billion, Hough said. Of that amount, about 10 per cent came from overseas business exclusing Canada and Mexico, half of which was distributed to foreign partners in communication services.
Overall, AT&T revenues in 1976 were $33 billion, including a small portion of Western Electric overseas revenues. On those revenues, AT&T earned profits of a record $3.8 billion ($6.05 a share) for an 8.9 per cent return on total capital and an 11.2 per cent return on common equity in the firm - levels exceeded by many other utilities which compete for investors' money.
It is this record which motivates AT&T managements to find sources of higher profits.
At the moment, by far the most important international development for AT&T is a case waiting for final action by the FCC involving the fast-growing North Atlantic market.
With chairman Charles D. Ferris a new arrival at the FCC, the agency this week postponed from Nov. 1 to Dec. 2 the date by which it will adopt a final plan for construction and use of new telecommunications facilities across the Atlantic.
At issue is a proceeding that started in 1970 and which will affect the availability of overseas telephone service. The economic stakes, too, are enormous.
On one side of the controversy is Communications Satellite Corp., which wants more future business for satellites. On the other is AT&T, other international carriers and the telephone agencies of foreign countries (mostly owned by governments), all of which favor continued expansion of undersea cable transmission to accompany the satellite system.
Representatives of foreign governments made an unprecedented personal presentation of their views before a congressional committee, and FCC representatives attended a meeting in Rome during September, where AT&T, Teleglobe Canada, 20 foreign agencies and 5 U.S. international carriers backed a division between cable and satellite.
AT&T and its associates want additional use of satellite circuits but also a seventh transatlantic cable in 1981. They have argued that this division would be least costly (a major factor in foreign agency decision making), that the foreign governments want such a division of communications, and that by not relying too much on satellite alternate services will be available.
In addition, the carriers' plan would assure continued growth of the submarine cable industry. AT&T's current total investment in cable communications is $145 million, Hough said.
Comsat argues that satellites offer flexibility and economics of scale unmatched by cable. Currently, satellites carry nearly 60 per cent of transatlantic messages, and AT&T favors a 50-50 split.