AT&T (T) Cuts Prices Again

NEW YORK (TheStreet) --  AT&T (T) has announced another price cut for its 2GB Mobile Share plan in an effort to undercut share gains from Verizon  (VZ) and a resurgent T-Mobile (TMUS).

The base price for a single user with no contract is now $65 a month, down $15 from the previous price. This price is for customers using the mobile carrier's 4G LTE network plan that includes unlimited call minutes and text messaging. The announcement came just two days after T-Mobile announced that it was raising the price of its unlimited data plan by $10 to $80 a month.

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Greater carrier competition has resulted in better deals for consumers as T-Mobile also recently upped the data allotment for its $50 a month plan to 1GB from 500 MB of data per month.

Verizon, the country's largest carrier, meanwhile has vowed to stick to its premium pricing strategy while offering only minor pricing cuts. CFO Fran Shammo took a shot at his competitor's price tweaking, saying: "We're not going to buy customers... You have to earn customers."

The new pricing strategy for AT&T is a sharp divergence for the company that once relied on a premium pricing strategy like Verizon's. However, as consumers have flocked to lower cost, no contract plans offered by T-Mobile and Sprint (S), AT&T seemingly has had a change of heart.

AT&T stock has seen a $0.16 (-0.5%) decline today while volume sits at 16.3 million shares traded, down 11.3 million shares from its daily average of 27.6 million shares.

TheStreet Ratings team rates AT&T INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their 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, compelling growth in net income, notable return on equity, expanding profit margins and largely solid financial position with reasonable debt levels by most measures. 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 2.2%. Since the same quarter one year prior, revenues slightly increased by 1.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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. Compared to other companies in the Diversified Telecommunication Services industry and the overall market, AT&T INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for AT&T INC is rather high; currently it is at 63.10%. It has increased significantly from the same period last year. Along with this, the net profit margin of 20.84% is above that of the industry average.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Diversified Telecommunication Services industry average. The net income increased by 279.2% when compared to the same quarter one year prior, rising from -$3,857.00 million to $6,913.00 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.82, 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 0.47 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • You can view the full analysis from the report here: T Ratings Report
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