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In this article
AT&T stock has been in a rising trend, and continues to impress on its new iPhone service.
AT&T's dividend payouts and increases build shareholder loyalty, and continued acquisition concretes its status as a telecom giant.
Making up more than 50% of the Telecom HOLDRs (TTH), the company is pushing up the entire industry.

Telecom Stocks: AT&T Pushes Up the Entire Industry

On Friday, the day the Apple Inc. (AAPL:NASDAQ) iPhone that I so desperately wanted was released to the public, I decided to cash in my free upgrade on my existing plan. After all, I've been walking around with the same Motorola cell phone for the last three years (actually it's been two of the same, since I had the first one replaced two years ago after I dropped it in the toilet a few hours before a long vacation). My current phone has no camera, barely plays audible ring tones which somewhat resemble some of my favorite songs, and definitely doesn't do well with picture text messages.

I'm most likely the last person on the planet who doesn't have a camera on my phone.

My current service is courtesy of AT&T (T:NYSE) but was originally under Cingular Wireless before the telecom giant acquired it Just recently, my monthly bills stopped appearing at the door in orange-and-white Cingular envelopes, and began being branded as an AT&T service.

Am I happy with my service? Sure. I don't suffer any dead spots when I talk to friends and colleagues, and the service is fairly cheap for the perks I get… albeit with an outdated phone.

Telecom Stocks: AT&T Stock Continues to Impress

AT&T's acquisition of Cingular Wireless was an added bonus from its merger with Bell South, originally announced in March 2006. This deal was anticipated to be worth $18 billion with $2 billion added annually to the value every year until 2010. 98% of shareholders approved the deal.

Since then AT&T has continued to pay quarterly dividends, and even increased its dividend by 6.8% in December 2006 to 35.5 cents per share or $1.42 per share annually.

In its first-quarter earnings, AT&T posted a gain of 21.6% in earnings and a doubling in net income to $2.8 billion compared to the year before.

In response to continuing and increased dividends, as well as continued increases in net income and earnings, shareholders have rewarded the company, by increasing its stock value 17% in just the first half of 2007.

Recently, AT&T's exclusive iPhone service has also boosted the stock's price… up 6.8% in only the last four days pre- and post-iPhone debut.

While in the beginning, AT&T caught some flack for activation problems with the iPhone, the telecom provider reassures the public now that the problems have been solved. And come on… only 2% of customers had a problem. With any new or improved technology or service, some problems arise. It's not worth harping over.

The fact that Apple has announced that the iPhone represents the most popular equipment the tech company has released bodes well for AT&T and its increasing sales, since the company has also ridden high on the success of the Motorola (MOT:NYSE) RAZR. Apple estimates that 500,000 Apple iPhones were sold on the first two days that they were made available.

Telecom Stocks: AT&T Acquires Another Wireless Provider

While the newest toy from Apple is a boon for AT&T, so is its continued insistence on picking up more wireless services. The telecom leader just announced that it is acquiring Dobson Communications (DCEL:NASDAQ), worth $2.8 billion.

Dobson is the biggest wireless service provider in Alaska, and owns 60 wireless markets in 17 states across America. You may know it best by the brand Cellular One. Dobson uses EDGE data technology, which the iPhone also uses instead of 3G, which has raised controversy among tech geek circles. (Supposedly, and believe me, I'm not an expert, 3G data technology is much more superior to EDGE.)

It's interesting that AT&T, around the same time the iPhone debuts, picks up a cellular provider that uses features from the iPhone, and is prominent in the Midwestern United States.

If this keeps AT&T airspace from being extremely clogged by new iPhone users, so be it!

I believe AT&T's (T:NYSE) success as a leading telecom provider will continue to boost its share price to $60 per share in the next two years, not only on the success of the iPhone but its continuing acquisition of cell-phone companies.

As long as it's not too much too soon, shareholders are sure to continue to vote with continued investment… and continue to be rewarded in dividends.

Heck, AT&T is 51.98% of Telecom HOLDRs (TTH:NYSE), which is valued around $40 per share, the same price as shares of T.

If you want to get more bang for your buck, go ahead and invest in both!

***

Ann Sosnowski is a small and mid-cap stock analyst for Taipan Financial News. She is the editor of Diligent Investor, a monthly newsletter that balances conservative and moderately risky investments that pertain to current market trends. She is also the editor of Diligent Investor Micro-Cap Hot Sheet, a monthly newsletter that finds the hottest penny and micro-cap stocks on the market.

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Related Resources
Telecom Stocks: Telecom Holders Tear Sheet (via AMEX)
Telecom Stocks: AT&T Buys Dobson (via Forbes)
Telecom Stocks: AT&T and Apple iPhone (via Bloomberg)