Last week, the news that AT&T was entering into an agreement with Crown Castle, allowing them to lease 9,100 of their towers and purchase 600 of them, was big news in the wireless tower industry. AT&T is agreeing to this $4.85 billion deal to increase the company’s cash flow so they will be able to allocate more money to their 4G LTE build out. However, the analysts at Seeking Alpha are wondering if AT&T is just trying to please their investors.
On October 23, 2013, AT&T announced their third-quarter earnings. AT&T reported that the EPS was up 14.3%, with adjusted EPS up 6.5%. Consolidated revenues of $32.2 billion were up 2.2%. Their smart phone base increased 1.2 million in the quarter. With the wireless activities continuing to grow and wireline declining, AT&T has decided to invest more in their 4G LTE network.
“The real issue however is that AT&T continues to build up leverage in order to please shareholders, which makes the stock quite risky despite the nice dividend yield in my opinion, especially in combination with possibility for opportunistic M&A action,” the Value Investor at Seeking Alpha explained.
To offset the increase in leverage somewhat, AT&T is selling assets including leasing rights on 9,100 wireless towers to Crown Castle International for $4.8 billion. (Source: Seeking Alpha) AT&T is hoping to create strong cash flows and returns to shareowners. AT&T reported that more than $40 billion has been returned to shareowners since January 2012.
