On Land Phone Lines
I had a client ask me a couple of weeks ago what I thought about companies like AT &T or Verizon given the explosive growth in cell phones and given what I believe will be a technology curve changing event as smartphones become more developed. On the surface it would seem these companies have everything going for them plus nice dividend. Underneath I'm troubled that people under 25 don't use or even have landlines. Then there is that pesky US government that is beginning to make noises about anti-trust surrounding these companies cell phone plans. 24/7 Wall Street is out with a piece that shares some of my thinking. Here is an excerpt with link.
Sunset for Ma Bell: AT&T (T) appropriately makes the point that its earnings now are driven by its cellular business and its new fiber broadband. The company now has 79.6 million wireless subscribers. The Apple (AAPL) iPhone is winning the phone company new business. Perhaps most importantly, the revenue that AT&T gets from wireless data use is rising sharply, and in the second quarter was up $934 million from the same period a year ago.
......{However} the disconnect rate of AT&T’s old-time landline telephone service is high, very high. AT&T had 46.3 million total consumer connections at the end of the second quarter, compared with 48.4 million at the end of the second quarter last year. It is beginning to look like the ISP dial-up industry. That attrition rate is the single most acute problem facing the company.........The outlook for this part of AT&T’s business is extremely bleak. It is not clear that the growth of the firm’s wireless operations can make up for trouble in its legacy divisions.....AT&T’s two most promising businesses are both in increasingly competitive fields. The fiber broadband operation competes with cable and will compete with new 4G internet wireless companies. Some people may elect to drop fiber broadband if the next generation of wireless is fast enough.The American wireless industry is crowded and the market is essentially saturated......The cellular companies will have to fall back on data revenue and that business may not be big enough to keep earnings at firms like AT&T and Verizon (VZ) moving up rapidly.AT&T finds itself in one large business that is shrinking and two other large businesses that have profitable futures with uncertain revenue growth. The question for AT&T may be where it can find opportunities for diversification in related sectors of the economy, ones that could still have double-digit growth. That is a hard task but not one that is impossible.
Link: http://247wallst.com/2009/07/24/sunset-for-ma-bell/#more-41957
Sunset for Ma Bell: AT&T (T) appropriately makes the point that its earnings now are driven by its cellular business and its new fiber broadband. The company now has 79.6 million wireless subscribers. The Apple (AAPL) iPhone is winning the phone company new business. Perhaps most importantly, the revenue that AT&T gets from wireless data use is rising sharply, and in the second quarter was up $934 million from the same period a year ago.
......{However} the disconnect rate of AT&T’s old-time landline telephone service is high, very high. AT&T had 46.3 million total consumer connections at the end of the second quarter, compared with 48.4 million at the end of the second quarter last year. It is beginning to look like the ISP dial-up industry. That attrition rate is the single most acute problem facing the company.........The outlook for this part of AT&T’s business is extremely bleak. It is not clear that the growth of the firm’s wireless operations can make up for trouble in its legacy divisions.....AT&T’s two most promising businesses are both in increasingly competitive fields. The fiber broadband operation competes with cable and will compete with new 4G internet wireless companies. Some people may elect to drop fiber broadband if the next generation of wireless is fast enough.The American wireless industry is crowded and the market is essentially saturated......The cellular companies will have to fall back on data revenue and that business may not be big enough to keep earnings at firms like AT&T and Verizon (VZ) moving up rapidly.AT&T finds itself in one large business that is shrinking and two other large businesses that have profitable futures with uncertain revenue growth. The question for AT&T may be where it can find opportunities for diversification in related sectors of the economy, ones that could still have double-digit growth. That is a hard task but not one that is impossible.
Link: http://247wallst.com/2009/07/24/sunset-for-ma-bell/#more-41957
posted by CR English at 6:38 AM
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