Will AT&T (T) Stock be Affected by Rivals' Request for DirecTV Deal Restrictions?

NEW YORK (TheStreet) -- AT&T Inc. (T) may have to make some concessions regarding its pending $48.5 billion acquisition of pay-TV provider DirecTV (DTV) if regulators go along with the requests of Dish Network (DISH), Cogent Communications (CCOI) and some advocacy groups as they are asking for restrictions on AT&T's power over online video and other content as part of the merger deal, Reuters reported.

On May 8 the critics met with a team of officials from the FCC, which included top merger reviewers, and proposed a detailed set of demands and potential conditions for the deal.

One of the demands was that the FCC make AT&T promise to sell Internet service as a standalone service at a reasonable price and same speed outside of any packages it may offer. They also want AT&T to have to comply with the new stricter net neutrality rules for seven years after the merger.

AT&T is expected to meet and negotiate with both the DOJ and FCC in the coming days, Reuters noted, adding that the deal is expected to be approved with some conditions.

Shares of AT&T are up by 0.43% to $34.04 in late morning trading on Thursday.

Separately, 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 some important positives, 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 and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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

  • T's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 0.3%. 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 gross profit margin for AT&T INC is rather high; currently it is at 55.24%. 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 9.82% trails the industry average.
  • AT&T INC's earnings per share declined by 12.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, AT&T INC reported lower earnings of $1.19 versus $3.41 in the prior year. This year, the market expects an improvement in earnings ($2.53 versus $1.19).
  • The change in net income from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Diversified Telecommunication Services industry average. The net income has decreased by 12.4% when compared to the same quarter one year ago, dropping from $3,652.00 million to $3,200.00 million.
  • Even though the current debt-to-equity ratio is 1.12, it is still below the industry average, suggesting that this level of debt is acceptable within the Diversified Telecommunication Services industry. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 0.48 is very low and demonstrates very weak liquidity.
  • You can view the full analysis from the report here: T Ratings Report

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