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AT&T (T) has announced the addition of the Samsung Galaxy Note 8 to its connected tablet solutions. The product will enhance the reputation of AT&T as the United States leader in the 4G LTE-connected tablet market. In this article, I want to explain how the expected rise in the tablet sales of the United States will enable AT&T to increase its postpaid net adds by 50,000 with the Samsung Galaxy addition. This development will improve the price multiples of AT&T.

Why will the company accomplish this feat? Worldwide tablet sales are exploding. According to Strategic Analytics, a research firm, in the United States tablet sales will grow from 48.8 million in 2012 to 103.7 million in 2013. As tablet sales explode, AT&T will experience revenue growth. This will improve its price multiples.

Financial

AT&T sales growth is certain. Its tablet sales boosted the company's postpaid gains in the first quarter. AT&T postpaid net adds reflected 365,000 postpaid tablets added in the period. The net adds helped the company's wireless revenues to reach $16.7 billion, an increase of 3.4% compared to the first quarter of the prior year.

In the fourth quarter, AT&T achieved its strongest postpaid net adds in three years. The tablet connected device net adds were 246,000. They propelled the company's postpaid net adds to 780,000. AT&T was able to record a net increase of 1.1 million in its total wireless subscribers and hit 107.0 million in the entire service.

AT&T And Tablets

AT&T has carried out some initiatives to boost its tablet net adds. Recently, the company knocked off $100 from the price of any tablet if customers signed up for a two-year data plan contract. The company allowed its new and its existing customers to purchase a single 3G or 4G data for their web surfing and apps. AT&T introduced a new set of shared plans that discounted the data when the customers only accessed the Ma Bell network with their tablets.

The new addition of the Samsung Galaxy will cement the reputation of AT&T as the leading tablet provider in the United States. The new product features the business solutions to ensure a work environment even away from the office. "The demand for 4G LTE-connected tablets is growing, and we're offering our customers the most choice and the best portfolio. The Galaxy Note 8.0 is an awesome tablet and flies on 4G LTE," said Chris Penrose, senior Vice President - Emerging Devices, AT&T.

AT&T is adding the Samsung Galaxy to its network to increase its postpaid net adds in its 4G LTE-connected tablet network. Fortunately, as noted, demand for tablets is growing in the United States.

Looking at the AT&T report, we note that the postpaid tablet net adds helped its wireless revenues to show a 3.4% year-on-year improvement in the first quarter. It enabled AT&T to report the strongest postpaid net adds in a three-year period during the fourth quarter. So it can be said that the connected tablet division is being run efficiently.

With a price to sales of 1.54, AT&T is trading competitively, especially given that it has a gross margin of 59.96%. The addition of the Samsung Galaxy will increase the postpaid tablet net adds, grow the company's postpaid net adds, and increase its wireless revenues.

Competition

With a gross margin of 59.96%, compared with 43.91% for Sprint (S) and 62.84% for Verizon (VZ), a price to earnings of 27.77, compared with 127.99 for Verizon and none for Sprint, and an EPS of 1.29, compared with -1.37 for Sprint and 0.40 for Verizon, AT&T is not doing badly. Sprint and Verizon are the company's rivals in the 4G LTE-connected tablet market. The initiative of AT&T will position the company to remain competitive in the sector.

Conclusion

There is a risk in purchasing an AT&T shares. The company has to cope with a debt of $74.92 billion. But looking at the quality of the Samsung Galaxy Note 8 and the growth prospects in the tablet sector, we can say AT&T will increase its postpaid net adds with the product. Based on its price multiples, we still say AT&T is a good buy for the long term.

Source: Can AT&T Show Growth With The Samsung Galaxy Addition?