RD's Picks

Let's talk about AT&T. ... However, a lot of this anticipation is stemming from AT&T's new TV service, U-verse, .... The company plans to have it available to 30 million homes and businesses by 2010. Is this feasible? Can AT&T successfully break into the cable television oligopoly?

Thought I might be done blogging and the QOTW pops up on a stock I own ...

Is it feasible to reach 30 million homes by 2010? Lets look at the numbers. That gives them two years, or roughly 500 workdays. That means they need to reach 60-thousand homes per day. Not sure how many installs a technician can do in one day, but Verizon Fios took about 4-hours. Ballpark, they need 30,000 techs doing installs - although it may go much faster in apartment and condo buildings. That's a lot of technicians running around in AT&T U-verse vans, but it should be feasible.

The more important question is how many of those 30 million homes will sign up for U-verse and the triple or quadruple play. Again, no telling - however I believe they will have some success. The even more important question is how much success they need to have - I think not much, all they really need to do is not muck it up.

I disagree with the question's premise that much of T's run up is anticipation of U-verse success. U-verse is certainly part of the picture, but T isn't priced at much of a premium to the market, is generating lots of cash, raised the dividend to about 4% when a two-year note only yields 3.3% and announced a pretty sizable buyback. Most of the stocks with that kind of yield are financials with mortgage exposure and all the other gremlins running through the credit markets. I believe income investors create a solid, concrete floor under the share price here.

T doesn't need a big hit in TV because, if the rest of the teenagers and young adults in the country are like my kids, text messaging fees alone will more than make up for the loss of land lines. And maybe AT&T wireless will find a few customers like this fellow from Canada. OK, so not many folks will run up an $85,000 phone bill - but file downloads, e-mail and internet access over cellular certainly has a lot of growth potential.

All T needs to do to meet expectations is capture a slice of the pie and run it at a profit. Potential marketing schemes to do that are pretty easy to come up with - free or discounted i-Phone with a contract; wanna watch the Patriots in game 16? - we have the NFL network, does your cable company?

Bottom line - Ma Bell's had a makeover and she's lookin' mighty fine.

Comments: View Comments |  Friday December 14, 2007  |  Stocks: T, VZ,