AT&T Inc. (T): This Telecom Giant Is Still Searching for Growth

Interestingly, Vodafone Group Plc (ADR) (NASDAQ:VOD) is a good option for investors looking for a high-yielding telecom play. The shares yield around 7.2%, and it has notable growth prospects in emerging markets. The latest buzz is that Verizon will try to buy Verizon Wireless, at a cost of around $100 billion. That’s a lot of money that Vodafone can put toward building its business or returning value to shareholders. Even if a deal doesn’t get done, Verizon Wireless is paying billions in dividends to Vodafone Group Plc (ADR) (NASDAQ:VOD). This looks like a win-win for Vodafone shareholders.

The Latest Idea

The most recent merger rumor is that AT&T Inc. (NYSE:T) is interested in Telefonica Brasil SA (ADR) (NYSE:VIV). That would quickly give AT&T a dominant position in Latin America and other Spanish speaking nations. This Spanish telecom giant, however, also has operations in mature markets like Germany, the United Kingdom, and Ireland. But the real benefit to AT&T would be Telefonica Brasil SA (ADR) (NYSE:VIV)’s central and south American businesses. That would extend AT&T from its home market south in a big way and fit logically with the U.S. operation.

That said, these markets are one of the reasons why investors should like Telefonica Brasil SA (ADR) (NYSE:VIV) even without an AT&T deal. While the company’s top-line fell slightly during the 2007 to 2009 recession, it has been on a largely upward slope otherwise over the past decade. The shares yield around 6.8% and, despite concerns about the weak mature markets in which it operates, the long-term opportunity seems fairly solid in Latin America.

Living Alone

While AT&T Inc. (NYSE:T) is living alone today, the idea of it shacking up isn’t far fetched since growth in the U.S. market will be slow at best, and competition will be fierce. This reality is part of the reason why the number two player has been trading at a yield discount to Verizon. However, with a one percentage point yield difference between the two, higher yielding AT&T shares are probably a better option today.

While there may be no truth to the rumors, don’t discount them totally. The next deal AT&T makes could be transformational.

The article This Telecom Giant Is Still Searching for Growth originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Vodafone. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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