AT&T and Verizon keep making their wireless networks faster, which is fuelling demand for new services, like mobile video. They are also making upgrades to their regular phone networks in order to spur sales of high-speed Internet access.
AT&T INC. (New York symbol T; www.att.com) is the largest wireless service provider in the U.S., with 109.5 million subscribers.
AT&T continues to profit as its customers upgrade to smartphones, which generate higher revenue than cellphones. About 75% of AT&T’s users on long-term contracts now use smartphones, and it feels this could rise to 90% in the next few years.
The company is also profiting from rising demand for its U-verse package, which uses high-speed fibre optic technology to deliver phone, Internet and TV services. It now has over 10 million U-verse subscribers, up 3.1% from 9.7 million on September 30, 2013.
In the third quarter of 2013, AT&T’s revenue rose 2.2%, to $32.2 billion from $31.5 billion a year earlier. Earnings per share gained 6.5%, to $0.66 from $0.62.
The $1.80 dividend yields 5.3%.
Tech stocks: Verizon will pay $130 billion to buy back rest of Verizon Wireless from Vodaphone
VERIZON COMMUNICATIONS INC. (New York symbol VZ, www.verizon.com) is buying the 45% of Verizon Wireless that it doesn’t already own from U.K.-based Vodafone Group (Nasdaq symbol VOD). Verizon Wireless is a joint venture that sells wireless services to 101.2 million U.S. subscribers.
Verizon will pay $130 billion for Vodafone’s stake, including $58.9 billion in cash. It will also issue $60.2 billion of new common shares to Vodafone shareholders, which will give them 30% of the combined firm. Notes and other compensation will cover the remaining $11.0 billion. Verizon expects to close the deal in the first quarter of 2014.
Meanwhile, strong demand for wireless and high-speed Internet increased the company’s earnings by 20.3% in the third quarter of 2013, to $0.77 a share from $0.64 a year earlier. Revenue rose 4.4%, to $30.3 billion from $29.0 billion. The $2.12 dividend yields 4.4%.
In the latest edition of Wall Street Stock Forecaster, we look at whether the network upgrades for these two firms will keep paying off with higher profits and let them raise their dividends. We conclude with our clear buy-hold-sell advice on these two stocks.
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