Why AT&T is a Good Buy

On Wednesday July 20th the FCC said that it would extend its review of AT&T's T proposed takeover of rival mobile services provider T-Mobile, while Senator Herb Kohl (D. Wis.) lodged a formal objection to the deal, citing fears of a monopoly. "I have concluded that this acquisition, if permitted to proceed, would likely cause substantial harm to competition and consumers, would be contrary to antiturst law and not in the public interest," wrote Kohl in a letter to the Senate Judiciary commitee. While the FCC's official statement asserted that their delay was because of complexities in AT&T's new models in its proposal, insiders have reported that the real concern rests on antitrust issues. Whether the deal goes ahead or not, AT&T is bound to go up in the next two quarters. Here's why: * The news has not made a dent in the stock price, which remains almost flat for the week at $30.31. * The $39 billion acquisition of T-Mobile, a brand of Deutsche Telekom DTE, would be a costly but valuable investment. T-Mobile is the fourth largest cellular network in America and its infrastructure would help improve AT&T services nationwide. Notoriously bad reception in urban areas such as New York City would be a thing of the past. * The chances of the FCC actually stopping the deal are extremely slim. Verizon VZ and Sprint S remain major national competitors, with several other regional competitors throughout the nation. * AT&T has gathered many supporters for the acquisition, including Microsoft, Facebook, and several politicians across the country. * Even if the deal is blocked, AT&T's stock will still rise, especially in Q3 and Q4 of 2011. There are several reasons for this. For one, AT&T has a forward P/E of 11.92, while Verizon's P/E ratio is 30. There is plenty of room for AT&T's stock price to go up while remaining competitive in its industry. What's more, AT&T's stock price has remained relatively stable since the stock rallies in March, when its stock jumped a modest 7% to 30.71, slightly higher than its current price. The stock market overall is up around 9 percent for the year, so AT&T is still behind--and a company this profitable shouldn't be. There is also the larger economic climate to consider. Despite lackluster job numbers, profits are up about 12 percent on average for every single one of the S&P 500 companies that have reported earnings so far this year. Likewise, AT&T's strong profit figures since massive layoffs in 2009 will keep it competitive and flush in capital for a long time. Most importantly: AT&T's second quarter profits will almost certainly beat analyst predictions of 59 cents a share. The company has just announced that it added 331,000 net subscribers in the last quarter, which is over three times the analyst predictions of 91,000. If the acquisition happens, subscriber numbers will explode; even without it, subscriber numbers are likely to increase when Apple AAPL releases its iPhone 5 in time for Christmas and users look to upgrade.