Foolish Forecast: Will AT&T's Bets Pay Off?

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Telecommunications giant AT&T (NYSE: T) will soon deliver its third-quarter 2007 results to investors. Before the mayhem, let's take a peak under the hood to see what's in store from Ma Bell.

What analysts say:

• Buy, sell, or hold the line? Out of 28 analysts weighing in on the company, 24 say buy. Three say "hold the phone," and one brave soul says to sell shares. AT&T also ranks as a four-star stock in our Motley Fool CAPS system, where more than 2,300 players have given input on the company.
• Revenue. The average expectation for revenue this quarter is $30.1 billion, up 41% from a year ago.
• Earnings. Profits are expected to climb 13% to $0.71 per share.

What management says:
While CEO Randall Stephenson acknowledged that "mobility is a major growth engine for AT&T," he also claims that "in the second quarter we improved our trajectory in key areas," including IP-based services. The company trumpeted that, in addition to super wireless results in the past quarter, its U-verse broadband offering and enterprise services showed solid improvements as well.

With its exclusive Apple (Nasdaq: AAPL) iPhone deal and its push to sell fiber optic-based broadband packages, AT&T hopes to not only stay on top of direct competitor Verizon Communications (NYSE: VZ), but also stave off threats from cable companies such as Comcast (Nasdaq: CMCSA) and Time Warner Cable (NYSE: TWC).

What management does:
Even without much of a boost from the iPhone last quarter, AT&T continued its positive trends of lowering churn and raising ARPU. The carrier should see a boost from the stylish Apple device this quarter, and the bigger benefits AT&T will see from hot devices like the Microsoft Windows-based HTC Tilt should help in future quarters, as well.

	03/06	06/06	09/06	12/06	3/07	6/07
Net Additions (millions)	1.7	1.5	1.4	2.4	1.2	1.5
Churn	1.9%	1.7%	1.8%	1.8%	1.7%	1.6%
ARPU	$48.53	$48.89	$49.81	$49.33	$49.21	$50.63

Source: AT&T.

One Fool says:
All eyes this quarter will be on AT&T's metrics, particularly ARPU, for the "iPhone effect." Investors are keen to see just what impact the chic media phone will have on wireless-services growth at the company. With iPhone users still representing only a drop in AT&T's big bucket of customers, though, I don't expect to see any huge upside to the numbers yet. Also, rumors that AT&T is giving a sizeable cut of revenue to Apple, if true, will diminish its impact on the numbers.

Looking a little farther out, it will be interesting to see what money AT&T puts on the table to acquire new spectrum in an auction in January. Everyone from Verizon to Google (Nasdaq: GOOG) may be ponying up billions to snag the valuable airspace, so it will be interesting to see if management gives any indications of its interest level here.

For more Foolishness, call up:

• AT&T's iPhone Cannibal?
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• A Simple Lesson From Buffett