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AT&T’s Value Proposition in the US Telecommunication Industry

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AT&T’s positioning in the telecommunication industry

AT&T (T) is the second-biggest US telecom company by market capitalization. Its market capitalization was ~$180 billion as of July 15, 2015. Verizon (VZ) is the largest telecom company. Verizon’s market capitalization as of the same date was ~$193 billion. Globally, China Mobile (CHL) is the biggest company in the telecommunication industry with a market capitalization of ~$255 billion.

[marketrealist-chart id=532263]

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Both Verizon and AT&T are integrated players in the telecommunication industry. AT&T’s wireline telecommunication operations are the largest in the US. Verizon has the second-largest wireline telecommunication operations. Verizon has the largest US wireless operations, and AT&T has the second-largest. Wireless is the biggest segment at both of these US carriers.

[marketrealist-chart id=529527]

AT&T’s high dividend yield

As part of a defensive industry, telecommunication firms usually outperform the market during recessions and underperform during periods of economic expansion. The telecommunication industry is characterized by stable cash flows and high dividend yields, especially on the wireline side. Wireless companies have to make recurring capital investments to manage capacity to meet rising data demand.

Companies in the wireline telecommunication industry such as CenturyLink (CTL) and Frontier Communications (FTR) have high dividend yields. As an integrated telecom company, AT&T also has a high dividend yield. As you can see in the above chart, AT&T’s dividend yield is greater than Verizon’s.

For diversified exposure to AT&T, you might consider the iShares Russell 3000 ETF (IWV) or the iShares U.S. Telecommunications ETF (IYZ). IWV had ~0.8% exposure to the telecom company as of June 30, 2015. And AT&T made up ~10.7% of IYZ’s holdings on the same date.

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