AT&T (T): Does Buying Fiber Create More Value Than Building It?

AT&T Inc. (NYSE:T) paid $5.75 billion for the consumer fiber business of Lumen Technologies, Inc. (NASDAQ:LUMN), adding over 1 million subscribers and more than 4 million locations. Buying operating networks accelerates expansion as broadband providers compete to bundle internet and wireless service. For investors exploring the Most Active Blue Chip Stocks to Buy Right Now, AT&T’s acquisition highlights how established telecom companies are using strategic deals to expand their networks and strengthen their competitive positions.

At 10x forward earnings, AT&T Inc. looks fairly valued if acquired markets deliver cash returns comparable with internally built networks. The purchase price starts the calculation; customer adoption and subsequent spending determine the payoff.

More Customers Must Improve Network Economics

AT&T Inc. acquired a footprint with roughly 25% customer penetration, versus 40% across its existing fiber business at year-end 2025. Closing that gap would spread network costs across more paying households. Wireless bundles can improve retention and reduce customer-acquisition spending.

The opportunity for AT&T Inc. is turning installed capacity into recurring cash. Cable and fixed-wireless competition can force discounts. Acquired and internally built markets should be compared at similar ages, after installation costs, maintenance and customer churn.

What the Earnings Multiples Capture

September’s valuation snapshot puts AT&T Inc. at 10x forward P/E versus 8x trailing P/E. Trailing P/E uses past earnings; forward P/E uses forecast earnings. Reported 2025 profits included a $5.6 billion gain from selling the DIRECTV investment, boosting historical earnings. That helps explain why the forward multiple is higher despite expected growth in underlying profits.

A 10x forward P/E places AT&T Inc. below its 11x at year-end 2025. Analysts expect normalized EPS of $2.34 in 2026 and $2.57 in 2027, roughly 10% annual growth. Stronger expected earnings support the valuation, while acquisition commitments and declining copper-service revenue warrant restraint. Repurchases also support per-share growth, making operating cash generation an important cross-check.

The Purchase Price Is Only Part of the Bill

AT&T Inc. must cover integration, network upgrades, customer connections, and further construction beyond the acquisition payment. These costs determine whether expansion that also increases financing demands improves shareholder returns.

October’s proposed joint venture would combine the acquired network with Gigapower, with the company owning 50%. Closing is expected in the first half of 2027, subject to approvals. Partner capital can ease funding demands, but wholesale charges and future equity contributions still affect returns. The acquired network’s direct cash flows already sit outside continuing operations, while retail customer relationships remain in the operating business. Returns must capture both retail cash after wholesale fees and the network’s investment needs.

June net debt of $126.4 billion predates the approximately $23 billion spectrum purchase from EchoStar Corporation (NASDAQ:ECHO), completed July 28. Announced financing included cash and incremental borrowing. That commitment, alongside annual capital investment of $23 billion to $24 billion, limits flexibility. Expected 2026 free cash flow above $18 billion supports debt service, but does not measure the acquired network’s standalone return.

The Closest Peer Sets a Cash Benchmark

In the same snapshot, Verizon Communications Inc. (NYSE:VZ), the closest comparison through its wireless and fiber businesses, carries 9x forward P/E and 12x trailing P/E. Analysts expect normalized EPS growth of approximately 7% in 2026 and 5% in 2027, below the roughly 10% annual outlook for AT&T Inc..

However, second-quarter operating cash flow less capital expenditure was approximately $6.4 billion for the peer versus $5.1 billion for the company. The latter’s reported free cash flow was $4.7 billion after additionally deducting vendor-financing payments. The peer’s stronger quarterly cash generation tempers the growth-based premium.

Conclusion

AT&T Inc. looks fairly valued at 10x forward earnings. Buying fiber supports that assessment when faster adoption delivers attractive returns after capital and financing costs. For readers of 10 Most Active Blue Chip Stocks to Buy Right Now, expanding coverage must translate into cash. Slow uptake or expensive integration would weaken the case.

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This article is originally published at Insider Monkey.