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Analyst Blog

AT&T (T - Analyst Report) announced earnings after the bell today, EPS was $0.67 and revenue came in at $32.08 billion.  The Zacks Consensus Estimate was at $0.68, and revenue estimate of $31.82 billion.  Therefore, AT&T just missed on the bottom line, and slightly exceeded top line.

The major announcement of the quarter was the acquisition of Leap Wireless International , for a cash offer of $15 per share (culminating in a $1.2 billion deal).  The addition does put the Cricket brand under the T umbrella, and will add 5 million new subscribers.  Analysts agree that AT&T is not looking for more subscribers with this deal; rather they will be adding PCS, and AWS spectrum bands which cover 137 million people.  The addition of more spectrums will boost the companies’ LTE capacity.  Also, the purchase will add AWS (advanced wireless services) to AT&T’s book of business.

On the negative side, there is a belief on the street that the US Government will block this merger just like it blocked AT&T’s attempted merger with T-Mobile (TMUS - Analyst Report) in 2011.  AT&T might have to sell off some spectrum in certain markets in order to get the governments’ approval.  It is estimated that this deal should close within the next 6 to 9 months. 

In afterhours trading activity, AT&T is trading sideways with limited volume.  This earnings announcement was in-line with several Zacks indicators.  First the Zacks Earnings Surprise Predictor, showed zero surprise (either positive or negative), and our agreement model showed a flat and stable report coming into the earnings announcement.  The numbers posted were therefore what the Zacks models predicted.    

Zacks will post a detailed earnings report tomorrow morning.