Telecommunications giant and American icon AT&T (NYSE:T) will report its first-quarter 2007 results on Tuesday. Listen closely and you can hear what's on tap for the company.

What analysts say:

  • Buy, sell, or hold the line? Out of 33 analysts putting forth an opinion on the company, 23 give it a buy. A total of seven say "hold the phone," while three currently have "sell" stamped on the shares. AT&T also ranks as a four-star stock in our Motley Fool CAPS system, where more than 1,400 players have given input on the company.
  • Revenue. The average expectation for revenue this quarter is $29.57 billion, up 39.3% from a year ago, thanks in part to recent acquisitions.
  • Earnings. Profits are expected to climb 17% to $0.61 per share.

What management says:
AT&T has gone through quite a transformation in the last few years, morphing through a few major acquisitions on both the wireless and wireline sides of the business. Cingular and AT&T Wireless came together in 2004, AT&T and SBC Communications were married in late 2005, and the BellSouth acquisition occurred late in 2006. The integration of all these businesses has so far gone well, as CEO Ed Whitacre noted "... merger integration initiatives continue to run on or ahead of our original plan." Indeed, the company revised its projected synergies from the BellSouth merger up to $0.8 billion to $1.2 billion in 2007 from the $0.5 billion to $0.8 billion expected previously.

What management does:
While wireless revenue was 37% of total revenue in 2006, the recent closing of the BellSouth acquisition will make wireless an even larger portion of AT&T's business. Management notes that going forward, the wireless business will be a key growth area, so we'll take a look at some of the metrics here.

The wireless numbers show that recent mergers are indeed paying off. AT&T added 6.9 million new customers in 2006 and has seen churn steadily decrease over the last two years, though it still lags Verizon Wireless' (NYSE:VZ) industry-leading 1.1% churn reported in the final quarter of 2006. The average revenue AT&T earns on each customer (ARPU) is dipping slightly, which by itself is a negative, but reasonable considering competitor Sprint Nextel (NYSE:S) has seen ARPU fall much more drastically, from the mid-$60s in 2004 to $60 in Q4 2006.

06/05

09/05

12/05

03/06

06/06

09/06

12/06

Net Additions (millions)

1

0.9

1.8

1.7

1.5

1.4

2.4

Churn

2.2

2.3

2.1

1.9

1.7

1.8

1.8

ARPU

$50.51

$49.65

$48.86

$48.48

$48.84

$49.76

$49.29
Source: AT&T.

One Fool says:
Management has done a great job of realizing benefits from the consolidation. Of more concern going forward, however, is organic growth in a highly competitive business. On the wireline side, the company faces stiff competition from traditional rivals such as Qwest (NYSE:Q) and Verizon, as well as from money-losing upstarts Vonage (NYSE:VG) and Clearwire (NASDAQ:CLWR), which are aiming to steal voice and data subscribers. The wireless market in the U.S. is reaching saturation, so AT&T will be challenged to retain customers and keep revenue steady with higher-value services. Going forward, a drop in subscriber growth is expected, but the company needs to continue the trend of decreasing churn while stabilizing ARPU.

Related Foolishness:

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Fool contributor Dave Mock still can't juggle bowling balls, and he now advises against such endeavors. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. The Fool has a disclosure policy.