Pitting 2 Telecom Names Against Each Other: Expect AT&T To Underperform Verizon

AT&T Inc. T may trade at a discount compared to Verizon Communications Inc. VZ, but Drexel Hamilton analyst Barry Sine said Verizon has a better growth profile and fewer risks.

The analyst reiterated a Hold on AT&T, citing subscriber headwinds in the near term and challenges associated with its bid to buy Time Warner Inc TWX in the long term.

Market Share Loss

The four national wireless carriers — AT&T, Verizon, Sprint Corp S and T-Mobile US Inc TMUS — all now offer unlimited data plans, but AT&T’s is priced the highest. A single line will cost consumers $10 more a month than with Verizon, and even greater amounts compared to the others.

The higher price point will likely be a hard sell, especially for consumers who can’t differentiate the company’s service with Verizon’s.

AT&T has also seen a slight loss in video subscribers since closing on the acquisition of DirecTV in 2015. Losses in U-Verse subscribers were not totally offset by gains in satellite.

“As these subscribers are key to realizing Time Warner synergies, this lack of momentum is a concern,” Sine said in a Thursday note. 

The Time Warner Deal

From a political perspective, it is unlikely that the Department of Justice will allow AT&T to buy Time Warner. There is hope if the Justice Department can steer clear of politics, seeing as the merger is a vertical one.

Comcast Corporation CMCSA's acquisition of NBCUniversal was subject to over 150 conditions; AT&T will likely face the same level of scrutiny.

But even with full synergies, Sine said, the deal could still be dilutive from an EBITDA valuation standpoint.

Related Links:

Is 21st Century Fox The Only Media Stock Worth Buying?

AT&T Opens Unlimited Plan To All Customers; Is There Any Real Difference Among Big Phone's Big 4?