AT&T (T), the nation’s largest telephone company, should continue to benefit from the explosion of telecommunications services, despite dogged competition from No. 2 Verizon (VZ). AT&T stands as the second-biggest cell phone service provider after Verizon Wireless and will jump into the top spot if regulators approve its $39 billion purchase of T-Mobile USA.
AT&T expects to complete that deal in the first quarter of next year, even as it faces challenges from some members of Congress who believe that the deal will concentrate too much power in one carrier’s hands.
In any case, AT&T continues to thrive, drawing customers to its cell phone, Internet and television services. The company’s shares also offer a healthy dividend, with the yield recently at 6 percent.
AT&T registered an increase of 331,000 net contract customers for its cell phone service in the second quarter, exceeding analysts’ expectations. The company had an exclusive deal to sell Apple’s iPhone until the first quarter, when Verizon joined the party.
Obviously, AT&T didn’t suffer much from the competition last quarter. The company put 3.6 million iPhones into service during the period, up 13 percent from 3.2 million a year earlier. Analysts estimate that Verizon will increase its subscriber base by three times the amount AT&T does this quarter thanks to the iPhone.
AT&T’s U-verse service, which bundles home-phone, TV, and Internet offerings, lifted its customer base by 202,000 in the second quarter to 3.4 million.
AT&T’s revenue rose 2.2 percent to $31.5 billion during the period, beating analysts’ forecasts. Net income fell 10 percent to $3.59 million, as analysts expected.
Many analysts are bullish on the company’s stock. Todd Rosenbluth of Standard & Poor’s gives it a five-star buy rating. “We expect gains in consumer wireless and broadband to continue offsetting some wire-line voice pressure,” he writes.
“Despite competition, we believe the company's strong balance sheet, long-term customer relationships, and wide operating margin are positives,” Rosenbluth writes. AT&T next reports around Oct. 21.
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