AT&T (T) Stock Lower, Faces $100M Fine For Slowing Data Speed

NEW YORK (TheStreet) -- Shares of AT&T (T) are decreasing on Wednesday by 0.3% to $34.57 after the Federal Communications Commission said that it plans to fine the carrier $100 million for deceiving customers, slowing data speed, and not notifying them of the practice.

The FCC alleges that the company sold customers unlimited data plans then "capped data speeds for those customers after they used a set amount of data within a billing cycle," The Wall Street Journal reports.

"Consumers deserve to get what they pay for," FCC Chairman Tom Wheeler said. "Broadband providers must be upfront and transparent about the services they provide. The FCC will not stand idly by while consumers are deceived by misleading marketing materials and insufficient disclosure."

"We will vigorously dispute the FCC's assertions," an AT&T spokesman responded.

While the company has made billions of dollars off the practice, it will now have to deal with the proposed fine, which is the largest in FCC history, the Journal noted.

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 several positive factors, 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 somewhat disappointing return on equity."

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

  • T's revenue growth has slightly outpaced the industry average of 2.9%. 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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