AT&T Stock Analysis (T)
DOUGLAS HANNA
FINANCIAL MANAGEMENT 6500
UNIVERSITY OF MISSOURI ST. LOUIS
Company Background
“AT&T Inc. provides telecommunications services to consumers and
businesses in the United States and internationally. Its Wireless segment offers
various wireless voice, data, text, and other services, including local wireless
communications services, long-distance services, and roaming services.”

AT&T Inc. founded in 1983

110 Million Wireless Subscribers

Utility providing wireless and wireline phone services, including distribution
storefronts, as well as TV and internet utility services
Source: Yahoo! Finance 2014
AT&T Closing Price:
Close:
Historical Pricing:
Stock at Aug 10, 2014
45
40
35
30

34.47
25

Beta of 0.29
15
20
10
5
0
7/17/2009
7/17/2010
7/17/2011
7/17/2012
Source: Yahoo! Finance 2014
7/17/2013
7/17/2014
AT&T (T) Stock Data

Listed on the NASDAQ

Beta of 0.29 (Yahoo! Finance)

Analysts Opinions: Buy or Hold

9 Buy or Strong Buy

22 Hold

2 Underperform or Sell

Has outperformed industry by
~38% in the last 5 years

Currently 34.47

Target at 36.18
Source: Yahoo! Finance
Income By Segment
Wireline
Wireless
Service Revenues
14,765
Equipment Revenues
1,588
Segment Income
4,937
Other
Data Revenues
7,923
Voice Revenues
5,697
Other Revenues
1,284
Segment Income
2,052
Advertising
Segment Operating Revenues
33
Segment Operating Revenues
305
Segment Income (Loss)
(90)
Segment Income
50
Source: AT&T Qtr2 Financial Report

Wireless: $

Percent of Total
Revenue by
Market Segment:


2,052 (Margin 13.8%)
29% of Revenue
Advertising: $ 50 (Margin 16.4%)


71% of Revenue
Wireline: $

4,937 (Margin 30.3%)
0.7% of Revenue
Other: $

-90 (Margin N/A)
-1.3% of Revenue
Source: AT&T Qtr2 Financial Report
Competitors
Wireless Phone
Wireline Phone
TV / Internet
•
Verizon
•
Verizon
•
Comcast
•
T-Mobile
•
CenturyLink
•
Time Warner
•
Sprint
•
Frontier
•
Cox
•
U.S. Cellular
•
Vonage
•
Charter
•
Straight Talk
•
Dish
•
Virgin
•
DIRECTV
•
Cricket
“
…their economic moats are also slowly eroding. In
future years, they won't enjoy the monopoly pricing
power they once did because of the increased use of
wireless phones and, of course, the Internet.
”
MORNINGSTAR, 2010
Moats:
1.
2.
3.
4.
5.
OPERATING MARGIN: 23.1% IN 2013
REDUCTION IN PENSION LIABILITY BY $7 MILLION
SUBSTANTIAL GROWTH IN AT&T U-VERSE
PRIMARY SOURCE OF GROWTH IN WIRELESS INDUSTRY
OBTAINED COMPETITOR CRICKET WIRELESS
Executives and Compensation
Name/Title
W. Watts
Total Cash
Equity
Other
Total Compensation
$2,041,833
$3,545,027
$229,095
$5,815,955
$2,213,333
$3,761,679
$484,681
$6,459,693
$6,633,333
$13,441,558
$522,203
$20,597,094
$2,586,667
$4,652,818
$239,898
$7,479,383
$2,451,667
$4,652,818
$506,210
$7,610,695
Sr. Exec. VP and Gen. Counsel
J. Stephens
Sr. Exec. Vice Pres. and CFO
R. Stephenson
Chairman, CEO and President
J. Stankey
Group Pres. and Chief Strategy Officer
R. de la Vega
Pres. and CEO, AT&T Mobility
Source: Salary.com
Board of Directors
Source: AT&T Investor Relations
Name
(Connections)
Board
Relationships
Type of Board Member
Primary Company
John McCoy
81
Relationships
Member of the Board of
Directors
Industry Capital Advisors,
LLC
70
Joyce Roche
69
Relationships
Member of the Board of
Directors
Girls Incorporated
67
Jon Madonna
66
Relationships
Member of the Board of
Directors
AT&T, Inc.
71
Reuben Anderson
J.D.
47
Relationships
Member of the Board of
Directors
AT&T, Inc.
71
Laura Tyson Ph.D.
182
Relationships
Member of the Board of
Directors
Berkeley Research Group,
LLC
66
James Kelly
26
Relationships
Member of the Board of
Directors
Emerald Packaging, Inc.
72
Impulsora del Desarrollo y
el Empleo en América
Latina, S.A.B. de C.V.
64
Relationships
Member of the Board of
Directors
Matthew Rose
130
Relationships
Member of the Board of
Directors
Berkshire Hathaway Inc.
54
Scott Ford
24
Relationships
Member of the Board of
Directors
Westrock Coffee
Company
51
Michael
McCallister
149
Relationships
Member of the Board of
Directors
Corphealth, Inc.
62
Cynthia Taylor
31
Relationships
Member of the Board of
Directors
Oil States International Inc. 52
Beth Mooney
79
Relationships
Member of the Board of
Directors
KeyCorp.
59
Member of the Board of
Directors
Silver Lake
58
Jaime Chico Pardo 73
Glenn Hutchins J.D. 295
Relationships
Age
Basic Debt and Liquidity Analysis
Liquidity

AT&T Current Ratio: 0.76
Debt to Equity

Competitors
AT&T D/E: 0.82
Competitors

Verizon: 0.86

Verizon: 7.38

Sprint:1.21

Sprint: 1.28

T-Mobile: 1.31

T-Mobile: 1.01
Cost of Capital Analysis
Weighted Avg. Cost of Capital:

Long term assets: 254,591,000

Tax rate is 22.77%

Long term liabilities: 151,804,000

Cost of Debt (pre tax) R debt = 2.5%

Total Debt (current and LT): 74,788,000

Cost of Equity or R equity = 4.76%

D/E= 0.82

D=74,788,000

E=90,988,000
Source: Stockresearching.com
WACC = R = (1 – Tax Rate) x R debt (D/D+E) + R equity (E/D+E)
Thus: R = (1-0.221) x 0.025(74788/74788+90988) + 0.0476(90988/74788+90988)
Thus: R = 0.779x0.0113 + 0.0261
WACC = 3.49%
Capital
Expenditures
Capital Expenditures by Year
2013 - $20,944,000,000
2012 - $19,465,000,000
2011 - $20,110,000,000

$2 billion in 2010 for upgrading wireless
networks for high speed data support.

An additional $1 billion in 2011 for data
and network infrastructure

Over $20 Billion in 2013 for LTE, Fiber
Internet, and U-Verse infrastructure

Cricket (Leap) wireless acquired in 2013
for $1.19 billion.

AT&T made a bid in May 2014 of
approximately $48.5 billion to acquire
DIRECTV (pending FCC approval)
Change in cash
2013 - (1,529,000,000)
2012 - 1,823,000,000
2011 - 1,844,000,000
Sources:
Yahoo! Finance
AT&T Investor Relations
USA Today
Telecomlead.com
Dividends

Current common share dividend rate is approximately 5.38% per share

AT&T has repurchased nearly 13% of common stock since 2012
Ex/Eff Date
Type
Cash Amount
Declaration Date
Record Date
Payment Date
7/8/2014
Cash
0.46
6/27/2014
7/10/2014
8/1/2014
4/8/2014
Cash
0.46
3/28/2014
4/10/2014
5/1/2014
1/8/2014
Cash
0.46
12/13/2013
1/10/2014
2/3/2014
10/8/2013
Cash
0.45
9/27/2013
10/10/2013
11/1/2013
7/8/2013
Cash
0.45
6/28/2013
7/10/2013
8/1/2013
4/8/2013
Cash
0.45
3/29/2013
4/10/2013
5/1/2013
1/8/2013
Cash
0.45
11/6/2012
1/10/2013
2/1/2013
10/5/2012
Cash
0.44
9/28/2012
10/10/2012
11/1/2012
7/6/2012
Cash
0.44
6/29/2012
7/10/2012
8/1/2012
4/5/2012
Cash
0.44
3/30/2012
4/10/2012
5/1/2012
1/6/2012
Cash
0.44
12/16/2011
1/10/2012
2/1/2012
10/5/2011
Cash
0.43
9/30/2011
10/10/2011
11/1/2011
7/6/2011
Cash
0.43
6/24/2011
7/8/2011
8/1/2011
4/6/2011
Cash
0.43
3/25/2011
4/8/2011
5/2/2011
1/6/2011
Cash
0.43
12/17/2010
1/10/2011
2/1/2011
10/6/2010
Cash
0.42
9/24/2010
10/8/2010
11/1/2010
7/7/2010
Cash
0.42
6/25/2010
7/9/2010
8/2/2010
4/7/2010
Cash
0.42
3/26/2010
4/9/2010
5/3/2010
1/6/2010
Cash
0.42
12/18/2009
1/8/2010
2/1/2010
10/7/2009
Cash
0.41
9/25/2009
10/9/2009
11/2/2009
Sources:
NASDAQ
Wall Street Journal
Derivatives Include:
Derivatives
“We record derivatives on the
balance sheet at fair value. We do
not invest in derivatives for trading
purposes. We use derivatives from
time to time as part of our strategy
to manage risks associated with our
contractual commitments. These
derivatives are designated as either
a hedge of the fair value of a
recognized asset or liability or of an
unrecognized firm commitment (fair
value hedge), or a hedge of a
forecasted transaction or of the
variability of cash flows to be
received or paid related to a
recognized asset or liability (cash
flow hedge). “
AT&T Investor Relations 2009

Interest rate swap agreements

Interest rate forward contracts

Foreign currency exchange contracts

Used to support international operations,
including China Telecom

Also will likely be used for new international
operations, such as the Middle East and
North Africa.
These instruments are used to manage
interest rate and currency fluctuations in
regards to debt.
Sources:
AT&T Investor Relations – 2009 10k
Wikiinvest.com
The Bottom Line:
AT&T is a blue-chip utility stock. Due to its low Beta of 0.29, this stock is a nice
stock to hold in a flat or slight bear market. The 5%+ dividends historically over
the last 10+ years make the stock especially attractive as a source of income
stream. In addition, AT&T looks poised in its field to continue to dominate the
market while also expanding further in the TV and Internet utility industry.
Considering the recent acquisitions (Cricket Wireless and the attempted TMobile takeover), AT&T isn’t slowing down in its greatest revenue generating
segment of wireless services. In addition, it could have a solid bump in growth
over the next few months if AT&T can successfully purchase DIRECTV and further
diversify its holdings in the coming months.