AT&T Inc. Earnings: Will Price Wars Crush Growth?

Fears of a devastating price war could spell trouble for AT&T. Find out more here.

Apr 18, 2014 at 2:21PM

On Tuesday, AT&T (NYSE:T) will release its quarterly report, and investors have started feeling a bit more secure about the prospects for the telecom giant even as competitive pressures heat up in the industry. Despite new threats from smaller rivals Sprint (NYSE:S) and T-Mobile US (NASDAQ:TMUS) -- and even though Verizon (NYSE:VZ) has taken full control of its Verizon Wireless division to preserve its perceived lead in the wireless-network arena -- AT&T has experience with price wars and knows how to make the most of business lines even if they start to see overall growth decay.

For years, AT&T and Verizon have had a stranglehold on the U.S. wireless market, charging high prices for their services yet experiencing almost no viable competition. With T-Mobile now pushing hard with new pricing plans, the prospects for a more serious price war are escalating. Moreover, speculation over a possible merger between Sprint and T-Mobile has raised concerns, given that such a combination would create a third major carrier to add to the mix. Let's take an early look at what's been happening with AT&T over the past quarter and what we're likely to see in its report.


Stats on AT&T

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$32.33 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance

Can AT&T earnings grow faster?
Analysts have been just the tiniest bit pessimistic in recent months about the long-term prospects for AT&T earnings, holding near-term estimates steady but cutting full-year 2015 projections by 1% to 1.5%. The stock has rebounded from its recent lows, climbing 9% since mid-January.

AT&T's fourth-quarter earnings report shows the positives and negatives for the telecom giant recently. Revenue rose by 2% as AT&T added more than 2 million new subscribers to its wireless and high-speed broadband service during the quarter, leading to a 20% jump in adjusted earnings. AT&T continued to get huge interest from smartphone users, with smartphones making up 93% of the company's phone sales in its nonprepaid segment. That led to strong wireless-segment performance, where segment revenue climbed 5% and wireless-data sales soared by 17%.

But the big-picture problem that AT&T and rival Verizon face is the emergence of T-Mobile as a serious contender in the U.S. market. T-Mobile has introduced numerous promotions to try to boost its subscriber counts, and many of those promotions have targeted AT&T specifically. That has forced AT&T to respond with margin-slicing promotions of its own that could lead to a repeat of the bad experience AT&T had with long-distance telephone service decades ago, where competition eventually led to unlimited-calling plans that replaced high-margin usage-based pricing. For now, Verizon has largely stayed out of the fight, but if it responds, the resulting cascade in pricing could hurt the entire industry.


One perplexing question for investors is where AT&T will find growth. The company said that it wouldn't pursue an acquisition of Vodafone in the near future, closing off one potential avenue that seemed to open when Verizon chose simply to buy its Verizon Wireless asset rather than taking over Vodafone entirely. Yet with the U.S. market near saturation, looking internationally seems like the most obvious direction for AT&T to go in order to capture new high-growth opportunities.

AT&T also has an opportunity in broadband Internet to use its presence inside millions of homes to provide higher-level premium service to customers. Yet there, AT&T runs into competition not just from fellow telecoms but also from tech giants seeking to expand their businesses and deliver the infrastructure needed for their users to have the best possible experience with their products. If tech companies end up building their own networks, it could present new threats to AT&T.

In the AT&T earnings report, watch to see how well the company handles all the challenges it's dealing with right now. The key will be for AT&T not to lose its strategic focus and to convince shareholders that it can keep producing value while also finding new avenues for growth.

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names.


Click here to add AT&T to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers