AT&T (T) Offers Credit to T-Mobile (TMUS) Defectors

NEW YORK (TheStreet) -- AT&T (T) announced a new promotion on Friday that will offer credit to anyone who switches to the carrier from T-Mobile (TMUS).

Shares of AT&T fell 0.9% to $34.65, while T-Mobile shares dropped 3.3% to $32.26 on Friday following the announcement.

The new AT&T promotion will offer a promotional card of up to $250 for any T-Mobile smartphone new customers trade in. Trade-in values vary by device, and the credit is only usable toward AT&T devices and services. AT&T offers an additional $200 credit when former T-Mobile customers sign up for a new AT&T Next plan, buy a new device at full retail price, or activate a device they already own.

AT&T's promotion comes a week before T-Mobile is expected to offer credit to offset the cost of early termination fees for those who switch carriers before their two-year contracts are done. This promotion is a chance for AT&T to retaliate before T-Mobile CEO John Legere announces his company's plan.

TheStreet Ratings team rates AT&T INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about its recommendation:

"We rate AT&T INC (T) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • T's revenue growth has slightly outpaced the industry average of 3.6%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • AT&T INC has improved earnings per share by 14.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AT&T INC increased its bottom line by earning $1.21 versus $0.66 in the prior year. This year, the market expects an improvement in earnings ($2.48 versus $1.21).
  • The net income growth from the same quarter one year ago has exceeded that of the Diversified Telecommunication Services industry average, but is less than that of the S&P 500. The net income increased by 4.9% when compared to the same quarter one year prior, going from $3,635.00 million to $3,814.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.89, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.38 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Diversified Telecommunication Services industry and the overall market on the basis of return on equity, AT&T INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.

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