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AT&T Inc. (T): Fighting Hard, But Stuck In The Middle

AT&T Inc. (NYSE:T) has been losing ground to duopoly partner Verizon Communications Inc. (NYSE:VZ) in recent years. Making matters worse, smaller players like T MOBILE US INC (NYSE:TMUS) and Sprint Nextel Corporation (NYSE:S) have been nipping at its heels. AT&T, however, is fighting back.

AT&T Inc.

The Big Boys

AT&T Inc. (NYSE:T) and Verizon are the two largest telecommunications companies in The United States. While they both have material land-line operations, their growth is coming from cell phones. Verizon Communications Inc. (NYSE:VZ)’s first quarter results were the stronger of the two, as customers signing up for data plans pushed the bottom line above analyst estimates. The stock jumped on the news.

AT&T’s first quarter results led to a large share decline. Not only were the company’s land line results weak, but its customer additions lagged behind Verizon. In other words, Verizon Communications Inc. (NYSE:VZ)’s business grew more than AT&T Inc. (NYSE:T)’s. That’s been a bit of a recurring theme.

Market Share

The U.S. cell market is mature. That means that market share is the name of the game. It can be a tough and expensive fight. If it were just AT&T and Verizon locked in a market share battle, the blows would probably be easier to take. It isn’t, however, and smaller players T MOBILE US INC (NYSE:TMUS) and Sprint Nextel Corporation (NYSE:S) are taking on AT&T Inc. (NYSE:T) from below at the same time that Verizon Communications Inc. (NYSE:VZ) is proving its resolve at the top.

For example, T MOBILE US INC (NYSE:TMUS) now sells Apple Inc. (NASDAQ:AAPL)‘s iPhone and has been using lower prices and no-contract deals to lure customers. The company’s merger with MetroPCS has also helped it to gain scale in an industry where size matters a great deal.

That said, the merger was only recently completed, so how the company fares over the long-term is still up in the air. What is clear right now, however, is that T MOBILE US INC (NYSE:TMUS) is working hard to steal market share and AT&T is the easiest target. This year is going to be a transition year for T MOBILE US INC (NYSE:TMUS)’s finances which makes it hard to say what results will look like. Regardless, investors would be better served sticking to industry leaders than buying into an also ran.

Merger Madness

Sprint Nextel Corporation (NYSE:S), meanwhile, is stuck in a merger haze. Japan’s SoftBank and DISH Network Corp. (NASDAQ:DISH) are the big bidders right now, with recent reports that SoftBank was considering dropping its bid to buy T MOBILE US INC (NYSE:TMUS) instead. Those rumors seem to be false, since the pair have renewed their love affair. Still, this merger drama makes Sprint a bad option for all but the most aggressive investors.

What is quite clear, however, is that once a new owner emerges, Sprint Nextel Corporation (NYSE:S) will be a stronger competitor with a renewed focus on growth. That’s likely to mean more aggressive promotional activity and more pressure on AT&T Inc. (NYSE:T).