AT&T Inc. (T), MetroPCS Communications Inc (PCS): A Perfect Storm Brewing in the Telecom Market

By the end of 2013, AT&T plans to reach 250 million Americans with its LTE network; so Verizon Communications Inc. (NYSE:VZ)’s big LTE lead shouldn’t be a concern to AT&T’s shareholders for long.

Shares have gained 12.5% over the last three months and trade at 52-high levels but still carry generally positive recommendations from brokerage houses.

AT&T is the leading player in the US telecom market, and as such commands a premium valuation as reflected in a current price-to-earnings ratio of 31.5. Considering its unique position in the market, the stock is still undervalued as also underlined by a forward price-to-earnings ratio of just 14.1. The company’s much sobered balanced sheet and a smart dividend yield of 4.7% are other factors which can attract more investors to the stock.

Foolish bottom line

Overall, the sweetened Deutsche Telecom deal for MetroPCS Communications paves the way for a long rally in its shares, while Sprint, despite emerging as a strong value-end buyout candidate, has largely shared its growth story with the market, and as such further gains look limited.

The article A Perfect Storm Brewing in the Telecom Market originally appeared on Fool.com and is written by Jacob Wolinsky.