This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Can AT&T Adapt to Fiber and Wireless and Still Maintain Its Yield?

NEW YORK (TheStreet) -- So far, customers are giving AT&T  (T) the strength to get out of the copper-line phone business.

The company's finances are like the ocean, seemingly flat but roiling underneath. So-called "legacy" revenue, from the "Telephone and Telegraph" in the AT&T initials, continues to fall. But for now it's more than offset by gains in high-profit Internet Protocol, or IP, business and cellular.

For the quarter ending in March, AT&T reported earnings of 71 cents per share, beating estimates by a penny, on revenue of $32.5 billion, which was in line with estimates

According to the company's 8-K, wireless revenue was up 7% year-over-year, and the company gained 1.062 million net new wireless subscribers, selling 5.8 million smartphones to what are now 116 million accounts.

Its NEXT upgrade program, under which customers pay off phones in 20 months through their bills rather than getting a discount in exchange for a contract, is proving popular with both customers and AT&T accountants.

Shares fell overnight, but had risen earlier in the day on news the company is launching a new streaming video service with the Chernin Group, headed by a former President of News Corp. (NWSA)

The Chernin deal, headlined by an investment of $500 million, and the mobile phone gains are symbols of much bigger things happening on AT&T's balance sheet -- like the investments it still has to make in order to maintain its current 5.1% yield. Some of this was discussed in its earnings release.

AT&T had $5.8 billion in capital expenditure spending during the first quarter. It generated almost $8.8 billion in cash flow from operations. It needs almost $2.4 billion in earnings to fund its 46 cent per share quarterly dividend, and its board recently authorized a 300 million share buyback program, which could cost another $2.5 billion each quarter.

Must of that CapEx must go to its wireless service, where the company faces increased competition from T-Mobile (TMUS) and the deep pockets of Sprint's (S) new majority owner, Softbank, which is plowing gains from its investment in China's Alibaba back into the company in a bid to break the AT&T-Verizon (VZ) duopoly.

Part of the threat in wireless comes from the coming FCC auction of old TV spectrum. AT&T is threatening to skip the auction if its actions are limited by agency desires to bring new entrants to the business. But can it really afford to do that and let Sprint take the prize?

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs