The Dow Jumps 1%, but AT&T Falls; Has Verizon Won the Mobile Wars?

The Dow Jones Industrials (DJINDICES: ^DJI  ) gained almost 1% on Wednesday, posting a gain of almost 159 points and recovering all of its lost ground from Tuesday's losing session. News that the Federal Reserve intends to continue its dovish stance toward interest rates shouldn't have come as surprising news, but investors still saw it as affirmation of the five-year-old bull market's staying power, silencing their talk of a possible correction. Nearly all of the 30 component stocks of the Dow Jones Industrials rose today, with AT&T (NYSE: T  ) posting the only substantial decline. AT&T's bad performance recently has raised questions about whether Dow telecom peer Verizon Communications (NYSE: VZ  ) has effectively won control of the U.S. mobile-network market.

AT&T's decline today seems tied to ongoing concerns about its proposed buyout of satellite-TV provider DirecTV. AT&T shareholders have believed for a long time that the company would eventually make a major acquisition, both in efforts to strengthen its business fundamentals as well as simply to keep pace with the massive expansion in Verizon's size after its full takeover of its Verizon Wireless business. But skeptics aren't certain that satellite TV is the right direction for AT&T to go, especially as consolidation in the land-based cable industry could create more powerful content-distribution rivals against which AT&T will have to compete. At the same time, DirecTV shareholders are following the lead of other target companies lately, demanding even greater compensation than the proposed $48.5 billion deal offers them.

By contrast, Verizon has maintained a laser-like focus on maintaining its grip on the wireless industry, and in light of recent price-based challenges from smaller wireless carriers in the U.S., Verizon's attention to the space is warranted. Having taken on massive amounts of debt in its acquisition of its Verizon Wireless business from its former partner, Verizon desperately needs to make sure that a possible price war doesn't create a long-term discount in the cash flow it expects to reap from its network. Aggressive moves from Verizon to secure valuable spectrum and keep improving the quality of its network could give Verizon the competitive edge it needs to keep charging a premium over discount carriers. With ongoing concerns about net neutrality, regulation of spectrum auctions, and other key matters, Verizon isn't yet in the clear. But investors feel a lot more comfortable with the moves that Verizon has made than with AT&T's somewhat murkier strategy.

Verizon hasn't yet won the mobile wars, but it's making a bigger play toward securing eventual victory. AT&T, on the other hand, is trying to make the most of all of its business opportunities, creating the potential for greater reward but running the risk of failing to achieve dominance in any of them.

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  • Report this Comment On May 21, 2014, at 10:46 PM, almypal1763 wrote:

    This guy did not do his homework!!! AT&T is much better than Verizon.

    1. AT&T has a much better Dividend at 5.3% compared to Verizon 4.0%

    2. AT&T has much more Revenue than Verizon. Verizon overpaid $130 Billion dollars? Really? They cant afford to do anything else at this time.

    3. AT&T will be Offer 4G LTE services to all Airlines in the Continental United States by the End of the year, bringing in millions if not billions in revenue.

    4. AT&T will also be offering 4G LTE and WiFi to connected Cars in 2015

    5. AT&T offers Digital Life Home Security Services expanding to all 50 states bringing in Billions of dollars

    6. AT&T also has over 116 Million wireless subscribers and 95% are smartphone customers bringing in tons of Revenue

    7. AT&T has Over 11 million Uverse internet customers and 6 million cable customers and growing each quarter bringing in billions of dollars.

    8. The purchase of Directv is a very smart move, now AT&T can offer bundle deals in areas it can not offer Uverse.. Very smart move and the price is right on the money.

    Where is Verizon ? The wireless business is very saturated and everyone already has a cell phone. I don't see Verizon trying to grow in other areas. They have no where anything close to the innovation of AT&T labs. Also, just because Verizon stock is a little higher does not mean they are a better company. We will see in the end who is the better company!

  • Report this Comment On May 22, 2014, at 6:37 AM, coach1000 wrote:

    Do some research please VZ pays a 4.40 dividend and Warren Buffet did not buyT but he bought VZ!

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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