Where Will Ma Bell Go in 2013?

A 5.5% dividend yield and 10% share price returns have helped AT&T investors beat Ma Bell's Dow Jones peers in 2012. Will the victory march continue next year?

T Chart

T data by YCharts.


The wireless industry is changing fast right now. AT&T itself tried to shake things up by acquiring T-Mobile USA in 2011, but that attempt was shot down by regulatory processes. The resulting company would simply have owned too much radio spectrum and too many user accounts.

But T-Mobile found a new partner in prepaid expert MetroPCS . Third-place rival Sprint Nextel is taking a major cash infusion from Japanese peer SoftBank and using some of it to buy Clearwire . Both of these transactions are expected to close in 2013, giving industry leaders AT&T and Verizon a whole new battlefield to survey.

The spectrum crunch continues, and I wouldn't be surprised to see AT&T reaching for another opportunistic merger. A tiny tidbit like Leap Wireless or U.S. Cellular could give Ma Bell a much-needed spectrum infusion without raising too many regulatory eyebrows. After all, the SoftBank/Clearwire/Sprint agglomerate may actually surpass AT&T's spectrum reserves. What's wrong with fighting back?

This could also be the year for reducing or even ending the hefty subsidies on high-end smartphones. As it stands, AT&T sacrifices profit margins now for the promise of long-term revenue streams later while Apple reaps the immediate benefits of these transactions. Gross margins would surge under a less subsidized policy, but management would watch the top line very closely to find out whether the idea is working.

Whatever happens, AT&T is the kind of stock you can watch through a long-term lens even in times of rapid change. 106 million wireless subscribers aren't going anywhere in a hurry, especially since AT&T remains a top provider of iPhone service.

2013 and beyond
The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in our brand-new free report: "The Motley Fool's Top Stock for 2013." I invite you to take a copy, free for a limited time. Just click here to access the report and find out the name of this under-the-radar company.

The article Where Will Ma Bell Go in 2013? originally appeared on Fool.com.

Fool contributor Anders Bylund holds no position in any company mentioned. Check out Anders' bio and holdings or follow him on Twitter and Google+ . The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days .

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Bonds for Beginners

Learn about fixed income investments.

View Course »

Investing in Startups

The lucrative and risky world of startups.

View Course »

Add a Comment

*0 / 3000 Character Maximum