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Here's Why AT&T's Smart Moves Can Lead to Long-Term Gains

August 22, 2014 | About:

It seems that the efforts to change the business model are working well for AT&T (NYSE:T), as the wireless provider came up with impressive results, reporting 1.6% growth in the revenue. The company is happy seeing growth in wireline, which came in on the back of U-verse and growth in the strategic business services. AT&T wants to continue this momentum, and it will focus on its shift to no-device subsidy plans and wireless.

Impressive moves

AT&T wants to increase its market share, which is why it is making investments in various profitable aspects such as Project VIP and Agile. This might hurt the company’s profit margins. But, these investments are expected to benefit AT&T in the second half of the fiscal year. In addition, AT&T is seeing traction in its wireless segment. It is getting popular among customers. AT&T NEXT and mobile share value plans are moving well among customers, and their positive impact can be seen on the company’s results.

AT&T is seeing good addition of new customers for post paid connections. These advances made by the company are giving handsome synergies, leading to a significant shift in the subsidy model. This will help the company reduce the churns, driving strong growth of large voice data, delivering better customer satisfaction.

Plans for the future

Moving ahead, AT&T is planning to acquire DIRECTV, as it thinks that there is much room for its growth. The company is confident of the synergies that it will receive from the acquisition, as AT&T wants to expand its base through Project VIP. This is an exciting step by the wireless provider as with this, it wants to bundle broadband services with other valuable services. AT&T is eagerly looking forward to this acquisition as this transaction is expected to take AT&T’s video, bundling strategies and cost structure to a new level. The company is confident of this move, and on the back of this, it is also optimistic for a better performance.

AT&T Next and Mobile Share Value Plans are doing well. More and more customers are getting attracted to them. Also, with the LTE rollout and the transition of customers toward the smartphones, AT&T Next is growing. Moreover, AT&T continues to grow its smartphone base, including migrations. It added nearly 1.6 million customers in the quarter. An exciting feature in this area for AT&T is that about 90% of its postpaid phone sales were smartphones.

AT&T is seeing strong growth rate in LTE device sales. The LTE-enabled phones are getting popular in the market due to their network efficiency. LTE enhances the overall customer experience of using a smartphone. According to the survey conducted, it has been revealed that about two-thirds of AT&T’s postpaid smartphone base is now having LTE phones, which is good news for the company as a larger customer base will power long-term growth.

Strategies to consider

Moving on, AT&T is seeing handsome growth across its subsidy model. The success story can be attributed to the fact that in just five months, it has added about 24 million smartphones, or about 44% to its postpaid smartphone base, which is a positive sign for the company. With this, the majority of its limited plan customers have shifted to the Mobile Share Plans.

Seeing the trend, AT&T is expecting Next sales to improve, as customers begin to upgrade their phones. However, the company has already started seeing addition of pre-Next customers as they are choosing AT&T Next when they are upgrading their phones in its company-owned stores. This transition in the device subsidy model is also driving positivity in its wireless mix, and is also driving higher value with improved churn and more sustainable margins.


Thus, driven by smart moves, AT&T is moving in the right direction. The company should be able to sustain its momentum in the long run on the back of growth-oriented strategies. Hence, investors should consider AT&T as a long-term investment.

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