Is Verizon a Better Buy Than AT&T?

AT&T (NYSE: T  ) is activating more iPhones, but Verizon (NYSE: VZ  ) is growing its wireless revenue three times as fast as its closest rival.

And investors don't seem to care. The stock is trading marginally lower because Big Red didn't blow away Street expectations in reporting third-quarter results. Revenue grew 5% to $27.9 billion, while profits checked in at $0.56 a share. Both figures were slightly ahead of analyst projections.

Yet the beat isn't what matters here. Growth is what investors need to pay attention to, and Verizon has more of it than AT&T does. Wireless revenue improved 9% year over year, easily beating the 3% growth AT&T achieved during an otherwise good third quarter.

No one looking at subscriber data should be surprised by these figures. Verizon had 882,000 post-paid net additions during the quarter, more than double the 319,000 AT&T had during Q3.

Why the difference? Handset parity may have something to do with it. Apple (Nasdaq: AAPL  ) no longer sells exclusively to AT&T, and both carriers offer most Android handsets. Both networks also host significant numbers of Nokia (NYSE: NOK  ) and Research In Motion (Nasdaq: RIMM  ) handsets.

Therein lies the problem for AT&T. Now that users have the option to have any smart device on any network, they're signing with Verizon in ever-greater numbers.

My guess is marketing and word of mouth are responsible for fueling this trend. But LTE -- short for "Long Term Evolution," a high-speed wireless broadband standard -- may also play a role. Remember, it was an HTC Thunderbolt operating on Verizon 4G that blew away Sprint Nextel's (NYSE: S  ) best in tests conducted several months ago, leading some to favor the HTC device over the iPhone for a time.

Verizon has been aggressively rolling out 4G LTE service nationwide over the past year. AT&T won't go national with its LTE network until next year. Don't be surprised if Big Red's wireless business continues to grow faster in the meantime.

Do you agree? Disagree? Please let us know which telecom you think is the better buy right now using the comments box below. You can also keep tabs on the wireless industry by adding any of these stocks to your Foolish watchlist:

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Apple at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of AT&T and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (11) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 21, 2011, at 5:23 PM, TheDumbMoney wrote:

    Do you think the billions in yearly dividends that VZ is going to have to start paying to Vodafone, or the fear thereof, have anything to do with VZ's valuation, Tim?...

  • Report this Comment On October 21, 2011, at 6:19 PM, almypal817 wrote:

    I agree with the guy that just left a comment.Verizon owes billions to Vodafone. Verizon is not a good investment at all. AT&T is a million times better for investing and this is why:

    1. At&t has not had to sell its land lines to raise money as Verizon did

    2. With Verizon service you cannot check rmail while talking to someone on tbe phobe

    3. AT&T is owned by one company and doesnt have to share profits with anyone as Verizon does.

  • Report this Comment On October 21, 2011, at 7:53 PM, conradsands wrote:

    Consumers are finally noticing that AT&T and Verizon = The Most Expensive Wireless Plans in America. We know where Verizon and AT&T (both in the top 5 for corporate lobbying) get all that money to run commercials 24x7, pay out huge “fat cat” executive bonuses and hire armies of lawyers and lobbyists to push the U.S. market into a wireless industry duopoly -- the American consumer.

    Taking into account the whole U.S. market, a combination of AT&T and T-Mobile would increase the Herfindahl-Hirschman Index (HHI), a widely accepted measure of market concentration, to 3,216 from 2,848, according to a Bloomberg analysis. Any score above 2,500 indicates a highly concentrated market, and any increase of more than 200 points clearly enhances market power, according to federal guidelines.

    If this ridiculous deal goes through, Sprint will be the only low-priced post-paid national wireless carrier left in the United States. T-Mobile customers are already fleeing to Sprint because they know they won’t get low prices from AT&T or Verizon. But AT&T and Verizon are two of the top corporate lobbyists in the country, so beware of how things could “mysteriously” turn in this case.

    “It’s only a slight overstatement to say that if they weren’t going to block this one, the Justice Department might as well just throw the antitrust guidelines out the window,” said Herbert Hovenkamp, professor of law at the University of Iowa, who is considered by many to be the dean of American antitrust law. “This merger clearly seems to violate them.”

  • Report this Comment On October 21, 2011, at 7:54 PM, conradsands wrote:

    Sprint is the only U.S. carrier to offer new and existing customers the iPhone experience with unlimited data plans starting at $79.99 per month. Sprint has been recognized as a J.D. Power 2011 Customer Service Champion — one of only 40 companies to have earned this distinction this year. To qualify for inclusion on this elite list, the companies must not only excel within their own industry, but also stand out among leading brands in 12 major industries evaluated by J.D. Power and Associates.

  • Report this Comment On October 21, 2011, at 7:54 PM, conradsands wrote:

    In a poll that asked 4,040 smartphone users how many dropped calls they had experienced in a three-month period, AT&T — carrier of Apple's iPhone and iPad mobile devices — came in dead last among the country's four largest carriers.

  • Report this Comment On October 21, 2011, at 8:01 PM, bernieyeball wrote:

    1. At&t has not had to sell its land lines to raise money as Verizon did

    Yes VZ sold off those land lines to raise cash. I've worked on those land lines all over the country in the last 35 years. To say that those facilities were junk is to be kind.

    AT+T has sold off many smaller rural exchanges in the past. I've worked on their facilities also. More junk.

    Maybe VZ thought it was better to raise cash than borrow.

  • Report this Comment On October 21, 2011, at 9:38 PM, mnosense wrote:

    By the technology nature, LTE just built this year is certaintly faster than 4G Sprint built 2 years ago. But next year Sprint will build a newer 4G outperforms VZ's easily!

    Does it mean $hit? Come on, it's just like your computer bought this morning runs 100x faster than 5 years ago's.

    Please, don't comment like a real fool.

  • Report this Comment On October 22, 2011, at 12:04 AM, almypal817 wrote:

    @bernyeyesocket or whatever,

    Verizon also received government bailout money. Verizon is not a good investment at all. AT&T is much better. AT&T has a lot more revenue than Verizon and is a better investment. Sprint's management have made poor decisions which have caused the company to lose customers. Sprint sent letters to their customers letting them out of their contract if they call to complain too much. What kind of stupid company does that.

  • Report this Comment On October 22, 2011, at 12:13 PM, prginww wrote:

    if you are a wise investor,it's simple verizon is much more into wireless and thats the future.

  • Report this Comment On October 22, 2011, at 7:07 PM, almypal817 wrote:

    If you are a smart invester, the better investment is at&t because you will.get more of a return on your investment. If you go with Verizon you will only get a marginal of yoyr investment because you will have to share the other half with Vodifone, that is Verizons partner. AT&T is wholy owned by at&t (an all American company). i rest my case

  • Report this Comment On October 26, 2011, at 9:53 AM, BedfordNH wrote:

    Some of the comments are quite narrowly focused ... like the blind men who tried to describe the elephant after having only touched a small part of it.

    almypa817, you need to chill. You make it seem like somehow VZ is so obviously worse than T, when your arguments are no more guesses into the future than the rest. It's like if I only looked at VZ's superior coverage in all major metros than T as a major indicator that it will somehow trounce T ...

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