What to Listen for During AT&T Inc. (T)’s Earnings Call

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AT&T Inc. (NYSE:T) is a bellwether within the US economy, given its ties to both consumers and business spending. AT&T Inc. (NYSE:T)’s earnings report will give us a glimpse into what consumers value and how these companies will continue to evolve and drive revenue growth in a market where smartphones are starting to become saturated.

Further stock repurchases

AT&T Inc.

In an environment of record low interest rates, AT&T Inc. (NYSE:T)’s common stock has been a safe haven for yield-hungry investors. The telecom giant is in a mature industry and pays out a mouth-watering dividend of 5.2% by paying out 53% of its free cash flow. AT&T Inc. (NYSE:T) also took advantage of the low interest rates, and issued debt near 2%, as well as its free cash flow, to repurchase its higher-yielding common stock.

In 2012, AT&T Inc. (NYSE:T) repurchased 5% of its shares outstanding and saved the company over $770 million per year. AT&T Inc. (NYSE:T) can now use the money saved to further reduce share count, retire debt or fund its pension plan. On the company’s earnings call, listen to see if the telecom giant is continuing this arbitrage opportunity.

AT&T has been the only major US telecom to repurchase more than 2% of its shares.

Consolidation in the industry

The telecommunications industry has seen an essential duopoly in the US with AT&T and Verizon Communications Inc. (NYSE:VZ). The number-three integrated mobile-phone operator, Sprint Nextel Corporation (NYSE:S), is now pursuing a merger with the Japanese firm Softbank. This opportunity will give Sprint Nextel Corporation (NYSE:S) a much-needed capital infusion that it can use to roll out its 4G network and compete against its bigger brothers.

The new Sprint will could pose a problem for both Verizon Communications Inc. (NYSE:VZ) and AT&T if it is able to compete on price and service with the two largest networks.

Churn and subsidies

The number of customers that AT&T loses in an average year is its churn rate. Ma Bell and Verizon have been stable at around 1.2% of customers per year, and both are trying different techniques to reduce this churn further. Both companies have been trying to retain customers by offering them upgraded phones at 18 months instead of the standard 24 months.

They have also been trying to make their products stickier by bundling land lines,  Internet, TV and mobile phone bills into a single statement that can be setup for auto-pay. This auto-billing system lets their customers maintain service without having to write out a check every month.

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