ATT is not the powerhouse it once was. Here is some of what I see in their business model
- Wired phones have been dead for a long time now
- Cell phone service is a commodity now. It is getting to the point that you can only grow by stealing customers from your competitors. It seems like TMobile is a good robber! I dropped ATT long ago.
- Cable TV subscribers have been dropping pretty badly with the younger generation leading the charge. I look at many of the channels and see them as whole programs of commercials. Yuck!
- When they do provide TV services, there is more competition in each area they service. Gone are the days in many places where they could raise and raise and raise the charges because they were the only provider.
Financially, their revenues have peaked in the last two years and are dropping.
Their Capex is close to their Dep and Amortization now. A few years back they were investing in their business a good more than their Dep and Amortization.
They have been increasing their leverage to increase their returns over the last 5 years.
Their net income margin has been fluctuating significantly over the last 10 years. It is the same for return on equity.
Like Comcast they want to move up stream to get out of the commodity business and into the content business. The Time Warner deal will be good for them (not so much for consumers).
While their trailing P/E is really low, it looks like it is down because of one-time gains from the tax change.
I wouldn't buy them even at their current low valuation.
"Your thing" may be their new slogan, but it is definitely not my thing! I just can't see much upside.
