Verizon and AT&T Send a Wake-Up Call

The comeback of Verizon (VZ - commentary - Cramer's Take) and AT&T should be a wake-up call to what is happening in that industry. The current spend of their competitors most likely cannot be maintained, and without spend and with the end of the churn and price drive-down that hurts them so much, you will see a slap-happy oligopoly the likes of which no industry has.

It is time to realize that these two companies have much better franchises and potentially much higher growth rates than they did before.

Unlike, say, the newspapers or the television and radio plays where digital is deadly, these companies thrive on digital. Unlike traditional media, where the margins of digital publications are disastrous, the digital margins on cell-phone offshoots are extraordinary -- texting, handheld internet, music downloads. These companies may still, after rocketing prices, be great buys with their yields and their dividends that can actually go up.

I am rather amazed at how the analysts still treat these companies as dinosaurs. Maybe they don't have Fios. Maybe they don't use iPhones. But in an era when dividends are either being slashed or are often too dicey, these companies have both safe dividends and growing businesses.

The contempt with which they are seen is extraordinary. I know people think that if Verizon didn't buy Alltel, it would have been much better off. The truth is that it could have paid less, but the combination, given the weakness of the competitors, could be so powerful that it is likely that the new Justice Department under Obama would not have approved it. So the lower price that people keep talking about might have been chimerical, given the regime change.

These two companies are run by fantastic, tough-minded CEOs who take risks, and these risks have begun to pay off.

They are emblematic, also, of why the Dow Jones averages will hang in here. They are simply doing too well to revisit the old lows.

At the time of publication, Cramer had no positions in stocks mentioned.

Know What You Own: In Friday's light trading, the biggest price gainers among telcos included Fairpoint Communications (FRP - commentary - Cramer's Take), Qwest (Q - commentary - Cramer's Take), Alaska Communications (ALSK - commentary - Cramer's Take), Frontier Communications (FTR - commentary - Cramer's Take) and Centurytel (CTL - commentary - Cramer's Take).

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