January 15, 2012 in Business

Motley Fool: Despite setbacks, AT&T sees promising future

 

The proposed $39 billion merger between AT&T (NYSE: T) and Deutsche Telekom’s T-Mobile USA is history, but AT&T’s future still holds promise.

AT&T had hoped to increase the number of its radio frequency licenses with the merger. Instead, as part of a breakup fee in the agreement, AT&T will have to fork over $3 billion worth of spectrum and roaming agreements to T-Mobile, along with $3 billion in cash.

So job No. 1 for AT&T in the new year will be to gain additional spectrum just to tread water. It’s waiting for the FCC to OK its deal to buy $1.9 billion worth of spectrum from Qualcomm.

The biggest reason AT&T is going to need as much spectrum as it can get is to catch up to Verizon in the race to smother the country with 4G LTE coverage. Verizon seems to have quite a head start in that regard. Its LTE network covers 179 cities across the country, vs. just 15 cities for AT&T.

The coming year is definitely going to be challenging for AT&T, but it’s certainly not in dire straits. The company just upped its quarterly dividend for the 28th year in a row.

Think twice before selling off your AT&T shares in a panic. That 6 percent dividend yield can be quite effective as an anti-anxiety pill. (The Motley Fool owns shares of Qualcomm.)

Ask the Fool

Q: What’s the prime rate? – T.W., Norwich, Conn.

A: It’s the interest rate that banks charge their best (lowest-risk) commercial customers. It matters because many other interest rates, such as those for mortgages, home equity loans, credit cards and other business loans, take their lead from the prime rate. A car loan rate, for example, might be calculated by taking the current prime rate and adding a certain amount to it.

The prime rate doesn’t change every day. It stays put for a while until major banks change their rates, generally moving in step with economic conditions. (That often happens when the Federal Reserve changes its discount rate, which is what it charges banks that borrow short-term money.)

There actually isn’t a single prime rate. Each bank may set its own, but the major commercial banks tend to use the same one most of the time. You’ll find the prime rate in most newspapers’ business sections.

Q: How can I find out who’s on a company’s board of directors? – N.B., Ashland, Ky.

A: You’ll frequently find a list of a company’s board members on its website. Look for links labeled something like “Company Information,” “About Us,” “Investor Relations” or “Corporate Governance.” You can also just call the company’s investor relations department and ask.

Most annual reports will list the members of the board, often with a glossy color photo of the gang. Another option is to check out the reports that the company files with the Securities and Exchange Commission (SEC). The annual 10-K report is your best bet, and you can get it by entering the company’s name or ticker symbol at http://finance.yahoo.com. It’s a long and informative document.

My dumbest investment

I asked my broker to buy me 100 shares of EnerNOC, whose ticker symbol is ENOC – or so I thought. The order I actually placed was for shares of ENCO. That turned out to be a tiny biotech-related company called Encorium Group, not the much bigger energy company. I figured it out when he called to ask why I wasn’t buying 1,000 shares, since the stock sold for about 54 cents. I finally sold my ENCO shares for about 21 cents each. – D.L., Washington, D.C.

The Fool responds: Encorium, a penny stock, was recently trading for about 12 cents per share, serving as a good reminder of how volatile and risky many pennies can be. You’re not alone in mixing up ticker symbols. Many people expect Intel’s ticker to be INTL, but it’s INTC. Similarly, Apple’s is AAPL, not APPL, and Coca-Cola is KO, not CO or CC.

Be careful and precise when placing trade orders. Online, a brokerage will often show you a summary of your order for you to check. Look it over and make sure it’s the right company before confirming.


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