The 2 Things AT&T Inc. (T) Does Better Than Its Rival

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There is no question that AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) are rivals. I’ve written about both companies in the past, and honestly several times I’ve found Verizon to be a better growth story. I worked in the wireless industry for several years at one point, so I know behind the scenes the opportunities and challenges that face these companies. While AT&T’s current quarter still shows them lagging their main competitor in a few areas, there are two things the company clearly is doing better than Verizon.

AT&T Inc. (NYSE:T)The landscape in the telecommunications industry is changing. Customers realize that they don’t need a landline if they have a cell phone. With the introduction of unlimited minutes offered by both AT&T and Verizon, I expect that this transition from landline to cellular will only speed up. Sprint Nextel Corporation (NYSE:S) has been offering unlimited calling for a while, but the company’s smaller subscriber base made it difficult for them to pull customers away from AT&T and Verizon. This change dramatically affects local carriers like CenturyLink, Inc. (NYSE:CTL) and Frontier Communications Corp (NASDAQ:FTR). Both of these companies rely on landline services to generate significant cash to fund their expansion into broadband, video, and other areas.

For each of these carriers, the faster they can move away from landline and toward wireless, broadband, digital voice, video, and other services, the better. You can see the decline in landline usage by looking at AT&T’s wireline division. The company lost 4.8 million switched access lines in the last year, which was equivalent to a just over 13% decline. By comparison, CenturyLink showed a 5.8% year-over-year decline. Frontier actually slowed their rate of decline in customers to just 1.61% in their most recent quarter. Verizon’s decline was in the middle of the pack, with voice connections down 6.8% versus last year. With this big challenge of offsetting landline losses with other service gains, AT&T has struggled to match Verizon when it comes to their wireless growth.

If you compare AT&T Mobility’s results to Verizon Wireless, on nearly every metric Verizon comes out ahead. In their most recent quarters, Verizon added twice as many customers with 2.2 million versus 1.1 million at AT&T. Verizon also had a lower rate of churn at 0.95% versus 1.19% at AT&T. Verizon also trounced AT&T with a 24% operating margin versus 14.5% at AT&T. This has been a constant theme in the past, as Verizon has been pretty consistent in outperforming their rival. However, AT&T reversed course and actually beat Verizon on two very important metrics.

One thing that A&T did better in the last year was repurchase shares. Companies like CenturyLink and Frontier have both issued shares to pay for acquisitions, and must make these acquisitions pay off to avoid lower earnings. Verizon’s share count has actually increased by just less than 1% in the last year. By comparison, AT&T was busy buying back shares. In fact, over the last year, AT&T’s diluted share count is down about 4.6%. How was AT&T able to pay for these repurchases? Quite simply, they generated better cash flow growth.

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