AT&T Inc. (NYSE:T) and Verizon plans on increasing its broadband speeds at an aggressive rate going from an average of 24 Mbps to 45 Mbps from 2012 through 2013. AT&T Inc. (NYSE:T) is expecting to increase those speeds even further to the 75-megabit per second (Mbps) to 100-Mbps range, and recently announced a fiber optic
1 gigabit per second (Gbps) Internet roll out in Austin, Texas.
Coincidentally, Google Inc (NASDAQ:GOOG) recently announced that Austin, Texas will be the next site to roll out Google Fiber. Google rolled out free Internet to Kansas City, Mo. consumers and the option for a 1 gigabit connection for $70 per month.
Google Inc (NASDAQ:GOOG) is in the business of connecting people to the Internet and landing them on its homepage. Google’s advertising revenue made up over 90% of its revenue and will continue to be the dominant driver of Google Inc (NASDAQ:GOOG)’s profit. Google has net profit margins of 19.6% translating into $32.58 earnings per share but does not pay a dividend. Google continues to fill its coffers with cash, now sitting at $54.4 billion. This financial cannon could be used for share repurchases, new infrastructure or even acquiring an Internet service provider.
Foolish bottom line
AT&T repurchased over 300 million shares this quarter. When a company repurchases shares, it no longer has to pay a dividend on that particular share, so Ma Bell will now save $150 million in dividend “expenses” each and every quarter by retiring those shares. AT&T Inc. (NYSE:T) has the largest dividend of the US telecom companies, and continues to be one of the most shareholder friendly companies around. Verizon Communications Inc. (NYSE:VZ) is a close second, but the fact that it doesn’t outright own its most valuable asset is troublesome, as the company would have to take on massive amounts of debt to purchase it.
Both telecoms make great income investments, but companies like Google Inc (NASDAQ:GOOG) that have massive amounts of cash on hand may be looking to disrupt the lucrative Internet-service-provider business model.
The article AT&T and Verizon: The Results Are In originally appeared on Fool.com and is written by Wes Patoka.
Wes Patoka owns shares of AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), and Google. The Motley Fool recommends Google. The Motley Fool owns shares of Google Inc (NASDAQ:GOOG). Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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