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Telecom's twin titans -- AT&T (NYSE: T) and Verizon (NYSE: VZ) -- both reported earnings last week. Neither report was well-received. AT&T fell after reporting a sharp slowdown in signing net new customers. Verizon slipped after reporting earnings that were about in line with expectations.

Big Red booked $0.51 in per-share earnings on $26.99 billion in revenue. Post-paid net more than doubled to 906,000 and Verizon now claims 104 million wireless connections, including 88.4 million retail customers. AT&T ended Q1 with 97.5 wireless subscribers.

And yet, looking back, it seems neither company has won the hearts of buyers of Apple's (Nasdaq: AAPL) iconic iPhone. Both carriers sold millions more handsets to iAddicts in the first quarter, leaving those betting on a reversal of fortune disappointed.

So if these two are more evenly matched than pundits had suspected, the question now is which one is the better buy for long-term investors? Let's dig into the numbers:




CAPS stars (out of 5) ** ****
Revenue growth 1.5% (1.4%)
Normalized net income growth (10.1%) (2%)
Gross margin 57.4% 60%
Return on capital 6.9% 7.8%
Levered free cash flow $8,736 $12,570
Dividend yield 5.60% 5.30%
Forward P/E 13.00 16.63
PEG ratio 2.80 1.73

Source: Capital IQ, a division of Standard & Poor's.
*All metrics calculated over the trailing 12 months.
^Except for percentages, all numbers in millions.

Three things stand out it this table:

  1. Both companies produce extraordinary cash flows after accounting for debt, interest, and working capital needs.
  2. Both pay dividends that yield well above the market average. Meaty dividends tend to pay off well for investors.
  3. But in terms of relative valuation, analysts expect Verizon to grow profits more than twice as fast as AT&T (excluding the effects of its planned T-Mobile merger) and Sprint Nextel (NYSE: S) over the next five years.

If you believe Wall Street is right, then Verizon is the no-brainer buy among these three. But are analysts' estimates trustworthy? I'm asking you. Please vote in the poll below and then leave a comment to let us know which telecom stock you'd buy.

You can also rate AT&T and Verizon in Motley Fool CAPS and keep tabs on the company by adding both stocks to your watchlist for free, personalized stock tracking.