AT&T INC. $41 (New York symbol T; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 6.2 billion; Market cap: $254.2 billion; Price-to-sales ratio: 1.6; Dividend yield: 4.7%; TSINetwork Rating: Average; www.att.com) is the largest wireless provider in the U.S., with 130.4 million subscribers. It also has 9.2 million wireless users in Mexico.
In addition, the company sells traditional phone services, television packages and high-speed Internet access to 51.7 million customers in the U.S.
Satellite purchase opened new markets
In July 2015, AT&T acquired DirecTV for $48.5 billion (70% stock and 30% cash). This business has 20.1 million satellite TV customers in the U.S., and 12.4 million in Latin America. DirecTV also owns regional sports networks and other cable channels.
Thanks to this purchase, revenue rose 15.8%, from $126.7 billion in 2011 to $146.8 billion in 2015.
Earnings increased 4.5%, from $13.1 billion in 2011 to $13.7 billion in 2012. Due to fewer shares outstanding, earnings per share gained 5.9%, from $2.20 to $2.33. Overall earnings then fell to $13.5 billion (or $2.50 a share) in 2013, and to $13.1 billion ($2.50 a share) in 2014. However, earnings improved to $15.2 billion (or $2.69 a share) in 2015; without unusual items, the company earned $2.71 a share.
In the three months ended March 31, 2016, AT&T’s revenue rose 24.4%, to $40.5 billion from $32.6 billion a year earlier. Earnings gained 16.5%, to $3.8 billion from $3.3 billion. Due to more shares outstanding, per-share earnings fell 3.2%, to $0.61 from $0.63.
However, if you exclude unusual costs, earnings per share jumped 10.8%, to $0.72 from $0.65.
AT&T aims to attract new users with special bundles that include unlimited wireless service when they sign up for its satellite or Internet TV services.
Video bundles spur mobile growth
The strategy is working. AT&T added 1.8 million new wireless subscribers (net of cancellations) in the U.S. during the latest quarter. As well, the average monthly revenue per user rose 5.1%.
The company also expects the elimination of overlapping operations will cut its annual costs by $1.5 billion. These savings will help AT&T pay down the extra debt it took on to buy DirecTV. As of March 31, 2016, its long-term debt of $122.1 billion was a high, but still manageable, 48% of its market cap. The company also held cash of $10.0 billion.
AT&T’s sound balance sheet will also support its plan to spend $22 billion on its networks in 2016. These improvements will help it cope as more of its wireless customers watch and share videos on their smartphones. In addition, the company is developing a new Internet video-streaming service under the Direc- TV brand. That should help it compete with Netflix and similar video services.
Still attractive in relation to earnings
The stock has gained 22% since the DirecTV purchase. Even so, it trades at a moderate 14.3 times its likely 2016 earnings of $2.86 a share. The $1.92 dividend yields 4.7%.
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Privacy Policy and Terms of Use
The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
This privacy policy is applicable to all TSI Network Visitors, Clients, Employees, Suppliers, Web sites, Management, and all other interested parties. Any links to or from our site are not covered by this policy. We encourage you to read the privacy policies of every site that you visit.
The privacy of the site/store visitor is very important to TSI Network, and is respected at all times. The information we receive from customers helps us to personalize and continually improve your online experience at TSI Network.
We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
We are continuously in the process of improving our sites and services. If any new features or policies require a change to this current policy, we will post a clear notice of this change on pages of our site where the privacy policy appears. The principle behind this privacy policy is to collect information with your knowledge and consent.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
Information You Give Us: We receive and store any information you enter on our website or give us in any other way through sign-up forms or ordering forms for publications and services. You can choose not to provide certain information, but then you might not be able to take advantage of many of our services and features. We use the information that you provide for such purposes as responding to your requests, customizing your web browsing experience for you, improving our website, and communicating with you.
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We do reserve the right, however, to collect and perform statistical analyses of the internet traffic to our website for our internal use. However, information collected does not allow us to identify any individual, and will not collect any personal information of the visitor. Furthermore, we do not sell, rent or loan to any outside parties the information collected and analyzed.
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Does TSI Network Use the Information It Receives?
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TSI Network has procedures in place to keep your personal information accurate, complete and current for the purposes for which it is collected and used. You may review the information that you have provided to us and where appropriate you may request that it be corrected. If you wish to review your personal information please send a request to: service@tsinetwork.ca.
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Changes to this Policy
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TSI Network may revise this Policy from time to time.
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