AT&T (NYSE:T) had an impressive first quarter with increased revenue, while management is extremely confident about the rest of 2012 and long-term prosperity. Despite the increasing growth of Verizon (NYSE:VZ) and inability to acquire T-Mobile (OTCQX:DTEGY), AT&T is clearly the largest telecom provider in the country and shows no sign of slowing down. Verizon's stock price increased by almost 7% since last year, while AT&T's stock price is close behind increasing at almost 5% over the past 12 months.
The current stock price and 52-week price range does not reflect the true value of this telecom tycoon. AT&T is a dependable long-term investment that will grow as the telecommunications industry and economy continue to develop. The range for the stock price over the past year has been very stable between $27 and $32, its beta is typically less than .5, indicating that this is a reliable stock to invest in for long-term growth with minimal volatility. AT&T's price-to-earnings ratio is only around seven points higher than Verizon while the market cap is approximately 190 billion, which is nearly double Verizon's cap of over 113 billion. Verizon shows high growth potential but AT&T shows no signs of slowing down or losing its dominance in various markets.
There are a number of factors indicating that AT&T will continue to lead its competition in the industry for at least a few more decades if not longer. AT&T did better than most analysts' projections, earning more than $3.5 billion in profit for the first quarter of 2012 in comparison with around $3.4 billion last year. It activated 1.1 million more iPhones than Verizon in the first quarter of 2012 as well. Being the first telecom provider to embrace the advent of the Apple (NASDAQ:AAPL) iPhone has truly separated AT&T from its competitors. Even though Sprint Nextel (NYSE:S) and Verizon now carry the iPhone as well, AT&T has firmly established its place as a leader in this mobile smartphone market.
This is not a growth stock but is a very reliable long-term investment with increasing dividends each year. The dividend yield is comparable with Verizon's at over 5% annually and AT&T continues to increase these payments each year. AT&T used over $2 billion of its $3.5 billion in cash flow from the first quarter to begin its buyback of 300 million shares this year. This will go back to shareholders as increased dividends, while increasing the earnings per share revenue throughout 2012 and 2013 as well. AT&T was also able to decrease churn by .18% while increasing average revenue per unit by $1 and increasing earnings per share by more than 5% from last year's first quarter.
Profits in the first quarter of 2012 have been record setting and there are a number of promising opportunities on the horizon for AT&T as well. Management recently announced that AT&T will sell 53% of its ownership of the Yellow Pages business to Cerberus Capital Management LP for $950 million including debt in order refocus its attention on its subsidiaries and ventures that are more essential and effective at increasing profits and market capital.
The stock price remains stable for the most part and growth is slow but earning profits from AT&T's stock is more of a certainty than with other opportunities on the market. AT&T has a strong position in the industry and management is taking assertive and measured steps in order to be leader of the industry into the next era of broadband, mobile data and 4G networks. Robust earnings in the wireless sector and the best quarter for wire line revenue in years are responsible for the strong start in 2012. Wireless earnings increased by over 20% from last year's first quarter, resulting in an additional $1 billion in revenue. Both the wireline and wireless services account for 78% of revenues in the first quarter, AT&T saw a 6% increase from last year, resulting in $1.4 billion increase in revenues. The continuous growth in these sectors, despite the growing competition in the market, is a significant indication that AT&T will continue to dominate this industry as a trendsetter.
AT&T currently has over 70 million postpaid subscribers and this number continues to grow along with the average revenue per unit. There has been growth in subscription additions in every customer category for almost two years now. Smartphones are growing in popularity and AT&T continues to grow in this market as well. As more people are becoming technologically apt, AT&T's continue to grow. It set a new record by selling over 5.5 million smartphones in the first quarter of 2012. AT&T also has the largest 4G network that allows consumers access over three times faster than its competitors. Focusing on customer satisfaction and effective tier pricing has been extremely profitable for acquiring new customers and retaining more each year as well.
PC World compared competitors in 9 different markets and concluded that AT&T has the fastest 4G network in the industry, currently it services over 35 markets in the U.S. AT&T also has the largest Wi-Fi network in the country with over 30,000 hotspots. Even without an upswing in the economy, AT&T continues to increase profits in the private consumer and commercial sectors as well. AT&T saw the highest growth in strategic business services in the past four years by increasing revenue for Ethernet, application services and VPNS by 19%. Consumer wireline revenue grew even more, increasing by almost 38% each year through the U-verse TV and broadband services. Annualized revenue from the wireline service is over $10 million, this is the most growth AT&T has seen from wireline services to date.
Management is honed in and efficiently addressing and building on AT&T's strengths in both the commercial and consumer sectors. Continuously adding to its infrastructure, available services and quality customer service is proving to be extremely effective in improving revenue for the short term and long term as well. Traditionally, AT&T has not been a growth stock, but this may change within the next 5 years, as this stock could certainly double. AT&T has a serious economic impact in this country from almost every aspect of its services.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.