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AT&T: Happy to Grow Slowly



October 29, 2013 – Comments (0) | RELATED TICKERS: T , GOOGL , VZ

Board: Macro Economics

Author: qazulight

AT&T Inc. (T), the second-largest U.S. wireless carrier, reported third-quarter profit that exceeded analysts’ estimates after adding subscribers and generating more revenue from smartphone data plans.


AT&T Inc. added 363,000 contract wireless customers in the third-quarter, compared with 151,000 a year ago. Photographer: Patrick T. Fallon/Bloomberg

AT&T doubled its wireless contract customers. On a MACRO note, Verizon did better and T-Mobile wasn't so shabby either.

AT&T’s fourth-generation LTE wireless network and its U-verse fiber-optic system are helping fuel growth, Chief Executive Officer Randall Stephenson said.

While Randall Stephenson still reminds me of Emperor Palpitine, he seems to be doing things well. However, the company is running lean, and I mean that in BP moment sort of way. More on that in a little while.

On a MACRO note, wireless is still changing the face of the world, even a old bald headed man in fly over land expects online mobile advertising for everything. I was looking for someone to push over some trees and run a bulldozer through my back yard. It was frustrating because when I called my lawn service man for a referral he gave me the name of a long established heavy equipment operator, but he couldn't text me the contact because he doesn't do text, (A little surprising because I pay him online via credit card) and I had to find a phone book to get the phone number for the heavy equipment operator. For me the whole procedure was an anachronism. While this may or may not mean you should run out an buy AT&T or Verizon, to ignore this space by ignoring Google and Facebook is probably foolish. (I dislike Facebook and do not use it and am not invested in it, and I have foolishly not bought any Google.)

Even with the jump in subscribers, AT&T’s gains were dwarfed by Verizon’s 927,000 new contract users last quarter. T-Mobile US Inc., meanwhile, gained an estimated 401,000 monthly subscribers, according to an average of seven projections compiled by Bloomberg.

AT&T is spending heavily -- $6 billion in the third quarter -- to upgrade its networks and gain an advantage against its competitors,

I can't tell you what to buy or even who is getting what, but I can tell you that AT&T is installing a lot of fiber and that fiber is reducing maintenance costs throughout the network. Additionally when AT&T moves to an all LTE system the operation of the network will be much much smoother, today the wireless system is about like Johnny Cash's Cadillac and an all LTE system will make both the handsets and the network a better place.

Also, this is just my experience. but it does not appear that the improvements are happening to the 3G or 4G equipment. In other words, old hand sets may still work for another two years, but eventually the service from them will be so poor that users will toss them in disgust. (This is the appropriate time to have a vision of Randall throwing back his hoodie and saying "Now young Luke, experience the true power of the dark side!)

Stephenson has said AT&T is looking at the global opportunities, aiming to capitalize on the growth of mobile Internet use worldwide. Earlier this month, he outlined a wish list of industry policy changes that could make Europe more attractive for investment.

On that comment about a BP moment. When a large company is running lean everything looks awesome until it isn't. Right now AT&T is not spending money on anything it doesn't have to. This cash hording mode generally means that the CEO has gone shopping, and I suspect that he is looking for some place that does not have 75 percent smart phone penetration, and a younger demographic and growing economies.

While Google may be able to make inroads against AT&T, I see that as a poor choice for Google as AT&T is happy to grow slowly and pay dividends, while Google really needs to grow faster. I could be wrong and AT&T could be over run by a Google Monster, but for now, I am dollar cost averaging into a 5.2 percent dividend as fast as I can.


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