AT&T (T) appears to be in position to further its growth, as it has continued to further improve its services and product offerings. While the primarily telecommunications company is not without downside, it is on par with, if not in better position than its competitors. Verizon (VZ) and Sprint Nextel (S) also appear to be in a nice position to grow and increase stock prices while BlackBerry producer Research In Motion (RIMM) appears to be in trouble. Verizon, Sprint, and AT&T can be in part thankful for Apple (AAPL) and Google (GOOG), and Samsung for the innovative products they continue to develop.
AT&T and Verizon are clearly the major competitors within the telecommunications industry, with market capitalization of about 206 billion and 127 billion, respectively. They also each announced revenue of about $16 billion in the first quarter of 2012, though for AT&T, that represents a huge step up ($11 billion from the fourth quarter of 2011) while Verizon has kept its earnings consistent for over a year.
Verizon and AT&T are in extremely similar positions of growth, and I expect future earnings to increase similarly. The price-earnings ratio agrees with this assessment, as Verizon's P/E is currently 48 versus AT&T's P/E of 50. These P/E ratios suggest AT&T may encounter slightly higher growth in earnings. Of course, this translates to low EPS numbers for both companies (under 1), which keeps investors banking on dividends (both around $.50). That's fine for now, but will it keep investors staying near?
One setback that has affected almost all handset carriers, and especially AT&T, is the postponement of Samsung's Galaxy S3 smartphone release. While AT&T is hardly the only handset carrier negatively affected by this situation, it does appear that AT&T may suffer the most from it. Originally planning to release the product for sale June 21st, the company had to delay the release by a week. However, following that delay, the company announced further postponement would endure. Initial reports stated AT&T would not announce another official release date, while predicted, correctly, the phone would be released for AT&T on July 6th.
Verizon was negatively affected almost identically, as shipping of the product was delayed, and expected to start today, July 11th. I definitely think the postponements could hurt the sales and revenue numbers for both AT&T and Verizon, which will put downward pressure on both companies' stock price.
Comparatively, Sprint Nextel was able to make the shipments of the 16 GB version of the product on June 21st, as it originally promised. Sprint did, however, have to delay shipment of the 32 GB version, and it has also restricted sales of this version to web sales, Sprint Business sales, and Telesales. Likewise, T-Mobile is receiving a huge order backlog, which will delay its release of the Samsung Galaxy S3. For each of these companies, one may understand that original sales of the product were extremely high, but the inability for each company to follow through and produce high quality service will hurt future sales - leading to declining financial indicators.
While Verizon has been ahead to AT&T for some time in terms of the handset products it offers, AT&T is making a significant attempt to improve its product line. Both companies offer Apple's iPhone; AT&T is actually the leading seller of the product in America, which will continue to be a huge revenue booster. AT&T also offers the finest collection of smartphones that incorporate Google's Android 4.0 operating system. This collection includes HTC's One X, and the aforementioned Samsung Galaxy S3, in an exclusive red shade.
Of equal importance to AT&T is the fact that Google is rolling out its Android 4.1, "Jelly Bean" operating system to select devices. The initial roll out will include Samsung Galaxy Nexus devices optimized for AT&T and T-Mobile. While this software will be available for all carriers of the Galaxy Nexus soon, this could be a nice head start for AT&T - especially if the updated operating system is a big success. I expect this to be the case, and it should increase sales, improving AT&T's bottom line. It report $16 billion in gross profit in March, an increase on all previous quarters. It will be pressured to equal this number but Google's new release could really help it get there.
However, it is not as if Verizon is not improving its product line in a similar way. Verizon and Research In Motion have announced the new BlackBerry Curve 9310 smartphone, which is specifically designed to ease the transition for users between regular cell phones to smartphones. This smartphone is intended to both look extremely appealing to users, while also boasting its ease of use. I personally do not believe the announcement of this phone will make much of a difference for Verizon's bottom line. Blackberry sales have been so far down, Verizon really can't bank on this giving it much of a boost.
For some time, there have been talks of the largest, most profitable tech companies acquiring Research In Motion. Research In Motion appears to be standing on its last leg, as its stock price has fallen almost 50 percent in three months and is near its 52-week low. It has been unable to continue the innovation necessary to increase its profitability like it did in the BlackBerry's heyday.
Looking throughout the telecommunications industry, I see a couple of great opportunities for investors. I expect both AT&T and Verizon to continue to grow. I believe this will happen because both companies will continue to offer the most innovative smartphones on the market, while also offering high-quality service. Sprint Nextel is a company that I am less confident in, but would be a decent company to invest in after Verizon or AT&T. On the other hand, Research In Motion is one company that I suggest avoiding. It seems to lack innovation, and I do not expect its new BlackBerry Curve to bring in the revenue necessary to start a turnaround.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.