Verizon Communications Inc. (VZ), AT&T Inc. (T): Investing in Telecoms and Their 4G Future

If HSPA is indeed counted as 4G, T MOBILE US INC (NYSE:TMUS)’s coverage looks very good — which is a huge positive because it will help ease its customers wait for the LTE technology until it comes online completely.

Like T MOBILE US INC (NYSE:TMUS), AT&T Inc. (NYSE:T)’s LTE-laced smartphones can also run on HSPA technology if LTE is not available.

Sprint Nextel Corporation (NYSE:S) is another runner in the 4G LTE race. The company first began rolling out its LTE network back in July of 2012, and has quite a reach with offerings in 88 markets, as well as plans to capture 170 more in the coming months. Sprint Nextel Corporation (NYSE:S), like T MOBILE US INC (NYSE:TMUS), still has a long way to go to catch up to its bigger competitors, but is also building quickly. The company seems to be building in the suburbs first, and expanding into cities from there. While the company tested in the slower range for LTE in a PCWorld/TechHive test, Kelly Schlageter, a spokesperson for the company also explained that:

“The study found LTE signal in six markets that haven’t launched, and solid speeds in markets where we have… We are not done yet and expect that our customers will benefit from additional improvements as the work progresses.”

Rootmetric’s study from March also found Sprint Nextel Corporation (NYSE:S) in the slow range, but the company seems to have added many more markets since then as well:

Chart data provided by Rootmetrics, via this source

The bottom line

As of now, the two largest are the two leaders, and probably the safest bet for investing in the future of the wireless communications industry that is 4G LTE. While both AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) carry sky-high P/E ratios and payout ratios as of now, these are largely attributed to temporary, one-time items that caused earnings to drop off a cliff — thus masking both firms’ more normalized earnings power.

For this reason, I will value these firms going forward. AT&T is trading at a reasonable 13.5 times forward earnings, with Verizon Communications Inc. (NYSE:VZ) trading at about 16 times its annual estimated earnings going forward. While AT&T is cheaper going forward, it also offers a higher dividend as well, yielding almost 5%, as opposed to only around 4% for Verizon. Both companies also claim a payout ratio around 70% when considering forward earnings.

If you believe that both firms will be able to either match or come close to their current expectations regarding forward earnings, then both firms make for solid bets on the next generation of wireless technology, as well as decent high-yielding dividend payers. AT&T Inc. (NYSE:T) is cheaper, but Verizon has grown its dividend at a faster rate over the past five years. It’s up to the individual investor to determine which (if not both) compliments their portfolio the best.

The article Investing in Telecoms and Their 4G Future originally appeared on is written by Joseph Harry.

Joseph Harry owns shares of AT&T.; The Motley Fool has no position in any of the stocks mentioned. Joseph 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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