AT&T (T) Stock Up in After-Hours Trading Following Iusacell Acquisition Announcement

NEW YORK (TheStreet) -- AT&T Inc. (T) announced this afternoon that it has entered into an agreement with Grupo Salinas to acquire Iusacell, a Mexican wireless company, for $2.5 billion.

Shares of AT&T are up by 0.69% to $35.15 in after-hours trading on Friday.

The proposed transaction will create the "first-ever North American mobile service area to cover 400 Mexico and U.S. consumers and businesses," AT&T said in a statement.

As part of the deal, AT&T will gain all of Iusacell's wireless properties, which includes licenses, network assets, retail stores, and approximately 8.6 million subscribers.

Grupo Salinas currently owns 50% of Iusacell, and the AT&T deal will take place after the close of Grupo Salinas' current purchase of the other 50% of Iusacell. 

Iusacell offers wireless services under its Iusacell and Unefón brand names. The network covers 70% of Mexico's approximately 120 million people, and AT&T plans to expand the network to millions of additional customers, the company said.

"Our acquisition of Iusacell is a direct result of the reforms put in place by President Peña Nieto to encourage more competition and more investment in Mexico. Those reforms together with the country's strong economic outlook, growing population and growing middle class make Mexico an attractive place to invest," AT&T CEO Randall Stephenson said.

Separately, TheStreet Ratings team rates AT&T INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AT&T INC (T) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • T's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 2.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • 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 0.40 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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 underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
  • The gross profit margin for AT&T INC is rather high; currently it is at 55.88%. Regardless of T's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 9.10% trails the industry average.
  • You can view the full analysis from the report here: T Ratings Report

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