We just recently discussed the new plan from Verizon (NYSE:VZ) regarding unlimited data. I asked “if you were paying attention.” I will be brief. In that article I told you the news has caused concerns for shareholders of AT&T (NYSE:T). I told you of course that this is currently my largest personal holding, and one that is in countless pensions, mutual funds and retirement accounts across the globe. I told you that the Verizon news hit shares of telecoms today, mostly on revenue concerns. Seeing pressure from other companies, Verizon has decided that it will once again offer unlimited data plans. This announcement clearly showed that there was concern over the competition. Verizon abandoned the unlimited plans due to costs and concerns over revenue losses, but sees it as losing out to competitors who do offer it. And guess what? It didn’t take long, AT&T has fired back.
Just coming over the wires we have learned that AT&T will now offer its very own unlimited plan. Please tell me you are not surprised by this. In an era of mobile everything, companies are doing all they can to ensure they can pull customers in. Many felt that the Verizon move would cause others to follow suit. Starting tomorrow, the plan will be available to all consumer and business postpaid AT&T wireless customers. The new AT&T Unlimited Plan will include unlimited talk, text and data on 4 lines for $180 for month. Specifically, customers will be able to make unlimited calls from the U.S. to Canada and Mexico, as well as send texts to over 120 countries. In addition there will be no roaming charges in North America, something customers have long complained about. That is a positive and will rival Verizon. As always, AT&T business customers can also take advantage of their additional corporate discount.
End of the day, with all of the majors offering an unlimited plan, I don’t see too much a major impact to customer churn. There will be some, but overall, don’t expect much of a negative or positive impact. As I have said we need to watch what the other companies do, but also need to be most concerned with the performance of AT&T and its own outlook. This move is unsurprising by AT&T and may or may not impact revenues. What WILL impact revenues are things we have been discussing all along. Innovation. That is the key. As you are all well aware I have discussed AT&T’s path to 5G, moving DirecTV to mobile, competitive plans, forays into social media experiments and of course a deal with Time Warner (NYSE:TWX). I will say plainly, the Time Warner deal is definitely a game changer. I am on record as having said that the company has to focus on what it currently is doing and not worry about Time Warner, but it is worth saying that Time Warner shareholders have approved the merger. Now we need to get through regulators.
As shareholders we must ensure that AT&T on its own is moving forward at a manageable pace, while continuing to gain customers, bring in more subscribers to DirecTV and manage its cash and debt situation. That is what matters. In order to support the share price growth, we have to care about changing expectations for the company as well as performance that is delivered. That is it. Therefore, I reiterate, revenue growth for 2017 should be in the low-single digits, with adjusted earnings growth in the mid-single digits. Margins are expected to expand and cash flows could hit $18 billion for the year, while maintaining dividend payout ratio of 70%. If the Time Warner merger is approved, the growth process will be accelerated. As for the Unlimited Plan, did you really expect anything less?