I have been scouring the market lately and have noticed a plethora of excellent news regarding AT&T (T). And while I do love the Googles and Apples, I’m certainly not impervious to the up-and-comers — or in this instance, a comeback kid. AT&T has staged quite the rally of late. A substantial 8% gain since December 1st caps off a 64% stock price increase over the last two years. One of the main catalysts has been its merger with Cingular, which became wholly owned by AT&T as of December 2006. Since then, AT&T has almost doubled its revenue year over year, and its future growth estimates have increased dramatically. AT&T is even attempting to break into the cable television industry with its new product U-verse.

Let’s take a closer look…

A little history
On Jan. 31, 2005, SBC Communications — formerly Southwestern Bell, one of the ‘Baby Bells’ created by the AT&T breakup in 1984 — purchased what was left of AT&T. SBC then changed its name to AT&T and adopted the AT&T logo.

Then, on Dec. 29, 2006, the FCC approved AT&T’s purchase of BellSouth, with included both Cingular Wireless and Yellowpages.com. The newly combined company retained the AT&T name, logo and “T” stock symbol. These events created the “new” AT&T, which is successfully on its way to becoming a telecommunications powerhouse once again. The new CEO, Randall Stephenson, has steered AT&T into the wireless current and has basically abandoned its traditional home-phone line business. AT&T is even trying to compete in the cable and high speed Internet markets.

The impressive new numbers
AT&T announced last week that its board of directors approved a 12.7% increase in the company’s quarterly dividend. This turns out to be largest annual dividend increase in the company’s history. The hike will push dividends from 35.5 cents a share to 40 cents a share on a quarterly basis, and from $1.42 to $1.60 a share on an annual basis. This dividend increase shatters any doubts about AT&T’s recent growth and almost doubles the 6.8% dividend increase approved in December 2006. The company also authorized a corporate stock repurchase plan of 400 million shares. This represents almost 6.6% of AT&T’s shares outstanding — a huge confidence booster for investors, since it tends to raise the stock price.

AT&T’s fundamentals are in check and its stock definitely has room for growth, especially when you look at the S&P as a benchmark for valuation. In 2008 AT&T expects to deliver the following to its customers:

• Continued wireless revenue growth, which will include revenue from its recent acquisition of Dobson Communications — 1.7 million wireless customers. This should, without a doubt, bolster revenue.
• A consolidated operating income margin in the 25% to 26% range, which will be a 2% increase from 2007. This reflects continued wireless growth, increased expense savings from merger synergies, and operational initiatives offsetting expected increased expense for deployment of AT&T U-verse services.
• A continued double-digit growth in earnings per share.
• Growth in free cash flow in the tune of $16 billion to $17 billion – free cash flow is cash from operations minus capital expenditures.
• Significant growth with the new AT&T U-verse service. The total AT&T U-verse subscribers are expected to reach 1 million by the end of 2008.

What’s the bottom line?
Well, with AT&T’s revived operations and burgeoning growth opportunities, it seems to be back on the right track. Upper management seems to be very confident in AT&T’s ability to drive revenue growth in the double-digit range over the next few years. The company also expects to deliver significant revenues from Yellowpages.com by way of content-based advertising. Revenues from this part of the business are expected to exceed $1.5 billion by 2010, up from the approximately $600 million in 2007.

Since AT&T acquired Cingular, it has increased its wireless customer base by 2 million. And let’s not forget that 1.1 million of these customers were acquired when the iPhone went on sale June 29. The iPhone has proved to be a very liquid venture for AT&T, and it expects continued revenue growth from iPhone sales though 2012 — which is when its agreement to be the exclusive phone network offering the iPhone expires.

This just goes to show you where AT&T is headed. Its decision makers know where the future is and they are willing to make the sacrifices in order to get there. Yeah, some people might say that AT&T is just lucky to have attached themselves to the iPhone, but let’s be honest — there was no luck involved. AT&T saw an opportunity to bull-dog its way into a top spot in the wireless market and took the chance. Say what you want about AT&T, but one simply cannot argue with cold hard facts. AT&T’s revenue has increased almost 93% to $30.1 billion during the third quarter of 2007, significantly up from $15.6 billion during the same quarter last year. They are making moves, and the right ones at that.

What is all this talk about U-Verse?
U-verse is the name for a group of services provided by AT&T including cable television, Internet access, and eventually voice telephone service. AT&T hopes to become a major competitor with the large cable providers like Comcast and Adelphia. U-verse is currently being offered to prospective customers in the company’s Southeast region. It’s expected to be deployed to approximately 30 million homes across 22 states by the end of 2010. AT&T says that it anticipates that U-verse will represent a multibillion-dollar revenue stream by2010.

This is a major undertaking by AT&T and if it is done right, could take AT&T one-step closer to the communications conglomerate that it once was. Some say that the U-verse projections are a tad bit on the lofty side. However, AT&T has done some pretty amazing things over the last couple of years. And yes, they might not succeed in breaking into the television oligopoly, but we know one thing for sure — they are going to give it a valiant effort…