Will These Big Moves Boost AT&T Inc. (T) Earnings?

AT&T Inc. (NYSE:T) is scheduled to release its quarterly earnings report tomorrow, and with the company having successfully created a huge wireless network covering the U.S., its prospects look bright. But if you’re expecting strong share-price appreciation to go with the telecom stock’s dividend, then the sluggishness in AT&T earnings growth will likely disappoint you.

AT&T Inc. (NYSE:T) pays a higher dividend than any other stock in the Dow Jones Industrial Average , hearkening back to its utility-like roots. But competitive pressures are forcing the company to take major steps to defend its key market position in the wireless industry and to find new potential revenue sources. Let’s take an early look at what’s been happening with AT&T over the past quarter and what we’re likely to see in its quarterly report.

Stats on AT&T

Analyst EPS Estimate $0.68
Change From Year-Ago EPS 3.3%
Revenue Estimate $31.81 billion
Change From Year-Ago Revenue 0.8%
Earnings Beats in Past 4 Quarters 2

Source: Yahoo! Finance.

Can AT&T earnings grow faster this quarter?
Analysts have recently reduced their views on AT&T Inc. (NYSE:T) earnings by a modest amount, cutting $0.03 per share from both their June-quarter estimates and their full-year 2013 consensus. The stock has been similarly lackluster, falling 4% since mid-April.

The big news for AT&T is its announcement last week that it would buy Leap Wireless International, Inc. (NASDAQ:LEAP) in a $1.2 billion deal. After failing to take over T MOBILE US INC (NYSE:TMUS), AT&T clearly wanted a combination that would bolster its wireless-spectrum assets and help give it room for future growth. AT&T Inc. (NYSE:T) offered a huge premium to the prevailing share price, as well as a kicker from the sale of a block of Leap spectrum. Still, some believe another bidder could emerge to make AT&T fight harder for Leap.

AT&T Inc.Still, the Leap Wireless International, Inc. (NASDAQ:LEAP) deal doesn’t address a more fundamental problem that AT&T Inc. (NYSE:T) is struggling with: how to find growth in a largely saturated U.S. market. During the past quarter, speculation that it might partner with Verizon Communications Inc. (NYSE:VZ) to buy out Vodafone Group Plc (ADR) (NASDAQ:VOD), with AT&T getting Vodafone’s international assets, hasn’t led to any concrete results. Similarly, reports that AT&T could be looking at Spain’s Telefonica haven’t gone anywhere, either.

With that in mind, AT&T Inc. (NYSE:T) has sought to maximize the value of its existing business. One step that AT&T and its peers have taken to try to bolster earnings is to tackle subsidies. The recent AT&T Next program allows customers to upgrade devices every year, charging monthly installments of $15 to $50 depending on what smartphone they choose. Rivals are jumping onto that bandwagon as well, with T-Mobile having started the ball rolling with its Jump program and with Verizon Communications Inc. (NYSE:VZ) having more recently announced its Edge initiative, but the goal of all of these programs is to encourage more upgrading without getting stuck with the full subsidy cost of the devices.