AT&T - Dividend Champ with Hidden Value

With Netflix signing two deals recent - one with Comcast and the other with Verizon, I can't help but think this is going to be the future of internet. The information highway now can charge tolls two ways! The basic business of any telecommunication provider is a subscription based business with consumer paying a fee every month. The challenge is that the landline market is quite saturated, and the high-growth wireless business is getting very competitive. 

So there is almost zero chance for any cable/telecoms to get out of low single digit growth rate.

The Netflix deals changed everything.

Now service providers such as Netflix is paying to get on the internet express lane. This can be first of many. 

Service providers and app developers now might need to pay to get speedier connections to the consumers. And the longer AT&T hold out on dealing with Netflix - the more Netflix is going to fork up to ensure AT&T broadband customers are getting the best experience. I can be wrong but that type of deal just made any companies providing internet connections a lot more lucrative. 

And let's not forget the same can happen with apps and wireless data plan:

Fred Wilson on Net Neutrality

This can only mean extra revenue for internet service providers. They are essentially double dipping on both end. The ISPs can do this because they have leverage - leverage created by years of consolidation and limited competition. Look what happened to the telecom industry in the past decade. We have so limited choices here in the U.S. because of mergers and acquisitions. We have four major wireless providers to choose from and if Sprint - Tmobile deal get approved - that will limit it to only three! As for at-home internet connection, most people only have two choices - their local telecom or their local cable company. 

Unfortunately, limited competition works against the consumers. The scale is now tipped into the hands of a few who can bring you on-line. Advertisers and app developers will fight for the screen time on people smartphone - and who's standing between them and the consumers?

Hence, I believe AT&T or any telcos and cable company that has substantial customer base stand to benefit from this trend.

AT&T just happens to offer a juicier 5%+ dividends. Couple that with the low rates banks are offering to park your cash. It's a no brainer.