AT&T (NYSE:T) operates in three segments: Wireless, Wireline, and Other. The company’s Wireless subsidiaries provide both wireless voice and data communications services across the United States, and through roaming agreements, in a substantial number of foreign countries.
Performance Report Card
The company posted strong second quarter earnings. Currently the company is paying a dividend of 5.2% and the cashflow yield is approximately 7%. The company reported strong postpaid subscriber additions and an improved churn for the wireless segment in 2Q14. Analysts have projected a healthy growth rate of 5.47% for the next five years.
AT&T said it has added 1.6 million smartphones from upgrades and new customers. 92 percent of phones sold on postpaid accounts were made up of smartphones so feature phones are on the steady decline. Additionally LTE smartphones made up two-thirds of AT&T's smartphone base.
- Warning! GuruFocus has detected 6 Warning Signs with T. Click here to check it out.
- T 15-Year Financial Data
- The intrinsic value of T
- Peter Lynch Chart of T
The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation.
About 44% of AT&T's postpaid customers are on a no-contract Mobile Share Value Plan. Half of all smartphones sold, according to AT&T, were to customers on an AT&T Next plan. Additionally, 366,000 postpaid tablets were added to an AT&T plan. All this led to an increase of 3.7 percent of wireless revenues from a year ago.The wireline business is still growing thanks to the U-Verse broadband and TV business with a revenue growth of 30 percent compared to a year earlier.
Revenue totaled $32.6 billion for the three-month period ending June 30, up 1.6% from a year ago. During the quarter, AT&T added more than 700,000 smartphones on post-paid plans— contract-based wireless voice-data plans that are considered much more profitable than pre-paid plans.
Cutting a Deal with Netflix
Netflix (NASDAQ:NFLX) and AT&T have confirmed that they have entered into an agreement in May. Netflix has agreed to pay U.S. broadband provider AT&T Inc to ensure smooth delivery of Netflix content to Internet users. Financial terms of such interconnection agreements are secret.
“We reached an interconnect agreement with AT&T in May and since then have been working together to provision additional interconnect capacity to improve the viewing experience of our mutual subscribers,” Netflix spokesperson Anne Marie Squeo said in an emailed statement.
Netflix has said it's paying some of the biggest Internet service providers in the U.S. for direct access to their networks in order to sidestep congestion that has caused frustrations for subscribers streaming high-definition videos.
Projects on the Go
Some of the projects that T will undertake are as follows-
SmartMic enables conference-goers to use their smartphones as remote microphones. With the help of this app one can raise hand when a conference panel opens up for audience questions.Instead of shouting over the crowd, or waiting for someone to deliver a mic to you, you can just speak into your phone as it pipes your voice through the stage speakers.
Nanocubes offer a way to visualize and disassemble large sets of data. What makes Nanocubes unique is that visualizing the data doesn't require tons of local resources. You can browse and interact with the data on a standard laptop or tablet.
With EyeDecrypt, document encryption meets augmented reality. You use the tech to view encrypted text, either on physical paper or on a screen, through your smartphone’s camera.
The telecommunications company said its Project VIP network transformation plan, which it announced in 2012, is progressing ahead of schedule and now offers coverage to nearly 290 million people with expectations to add more than 400,000 new business customer locations in the second quarter.
AT&T announced a major initiative to expand its ultra-fast fiber network to up to 100 candidate cities and municipalities nationwide, including 21 new major metropolitan areas. The fiber network will deliver AT&T U-verse with GigaPowerSM service, which can deliver broadband speeds up to 1 Gigabit per second and AT&T’s most advanced TV services, to consumers and businesses. AT&T will work with local leaders in these markets to discuss ways to bring the service to their communities.
AT&T expects wireless margins to improve as more customers move to its newer plans, AT&T Next and Mobile Share Value — something that should begin kicking in during the second half of the year, the company said.
AT&T also said its U-verse service, for phone, Internet and TV, had strong growth. It added 190,000 subscribers to the television service and 480,000 to its broadband Internet service. It said Project VIP, an investment plan to expand its network infrastructure, helped attract subscribers to U-verse. The company’s network has exploded more than 50,000 percent over the last six years. The company has also invested more than $119 billion in its network over that time. The company is in a position to create greater shareholder returns.