On Jul 29, we maintained our Neutral recommendation on
). The company displays strength in both wireless and wireline
segments along with efficiency in operations and execution of
various strategic actions. However, the company's performance in
the near term might be impacted by certain headwinds. This
Dallas-based leading telecom firm carries a Zacks Rank #3 (Hold).
We believe that AT&T is well poised for growth with prospects
ranging from robust subscriber additions, higher smartphones
sales, expanding LTE coverage, growing demand for mobile Internet
to faster fiber deployment and U-verse gain. The company stands
as a leader in WiFi (wireless broadband) connectivity with over
30,000 domestic and 190,000 international hotspots.
Lucrative acquisitions and agreements will contribute largely to
AT&T's growth story. The company proposed to take over the
largest prepaid wireless operator in the U.S. -
Leap Wireless International Inc.
) - for $1.2 billion.
This deal will endow AT&T with a stronger pre-paid
business line, competitive advantage, more customer care service
facilities, low-cost data plans and robust financial resources.
We also believe the agreement with IBM will enable the company to
scale up its business in the wireless segment and enhance service
offerings that garner significant market traction.
HAWAIIAN TELCOM (HCOM): Free Stock Analysis
LEAP WIRELESS (LEAP): Free Stock Analysis
NIPPON TELE-ADR (NTT): Free Stock Analysis
AT&T INC (T): Free Stock Analysis Report
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We have a positive outlook for the strategic initiatives that
AT&T has adopted for better performance and expansion. The
company plans to woo customers with early upgrades to smartphones
and tablets every year. The carrier's new device upgrade service
called AT&T Next that will allow subscribers (both new and
existing customers) to change their old smartphones or tablets
every year without any upgrade fee or down payment.
However, we stay on the sidelines taking into account the various
roadblocks that AT&T faces. These are primarily a competitive
telecom environment, constant changes in technology, failure to
succeed in spectrum auctions and a hefty iPhone subsidy.
For the third and fourth quarters of 2013, the respective Zacks
Consensus Estimate for earnings is 68 cents and 49 cents per
share. This reflects year-over-year growth of 9.0% and 11.1% in
2013 and 2014, respectively.
Companies operating within the telecommunication sector that are
worth taking note of include
Nippon Telegraph and Telephone Corp.
Hawaiian Telcom Holdco Inc.
). Both the stocks hold Zacks Rank #1 (Strong Buy).