Bigger AT&T rates a `buy'

Your Money

April 01, 2007|By Andrew Leckey | Andrew Leckey,Tribune Media Services

I am counting on my AT&T Inc. stock. Will it hold up its end of the bargain?

- R.M., via the Internet

The company's voracious $86 billion acquisition of BellSouth Corp. expands its holdings into the Southeast and achieves full ownership of Cingular Wireless LLC. Keep in mind that AT&T used to be called SBC Communications Inc. until two years ago, when it adopted the new name after buying AT&T's long-distance business.

The expansion occurs at the same time it is significantly upgrading its local telephone network. Its traditional phone service is in decline, and the number of first-time cell-phone customers is expected to slow.

Cost savings by eliminating redundant operations is the rationale for the acquisitions. It expects to generate cost savings of $22 billion from the latest deal. For example, three substantial advertising budgets will be reduced to one.

Shares of AT&T (T) are up 10 percent this year after a 46 percent gain last year. The company's net income increased 17 percent in its fourth quarter.

AT&T has started selling new dark red BlackBerry Pearls and Palm Treos. In addition, as sole carrier of the iPhone from Apple Inc., it looks forward to the release this year of that handset, which features iPod music player and a mobile Internet device.

Despite some divergence of opinions, consensus rating on AT&T from analysts is "buy," according to Thomson Financial. That consists of eight "strong buys," 14 "buys," seven "holds," two "under performs" and one "sell."

The firm has remodeled the first of 2,000 company-owned Cingular stores switching them to the AT&T brand. Earnings at AT&T are expected to rise 12 percent this year, which is in line with projections for the domestic telecommunications services industry. Next year's forecast is 13 percent versus 18 percent for its peers. The five-year annualized growth rate of 9 percent compares with 7 percent expected industrywide.

As a new investor, I would like to know what the Federal Deposit Insurance Corp. covers and what investments receive that coverage.

- K.R., via the Internet

The FDIC insures deposits at 8,600 institutions nationwide for checking accounts, savings accounts, money-market accounts (but not money-market funds) and certificates of deposit.

"The basic insurance is $100,000 per person per account category at an insured bank," said David Barr, an executive with the FDIC in Washington. "Individual accounts, joint accounts, retirement accounts and trust accounts are each categories that are insured separately from each other."

Federal law provides up to $250,000 in deposit insurance coverage for certain retirement accounts, such as individual retirement accounts, at participating institutions.

yourmoney@tribune.com

Andrew Leckey writes for Tribune Media Services.

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