It must have seemed to be something extraordinary when the words “Mr. Watson, come here. I want to see you” were first heard over the telephone. At that moment, humans were no longer separated by distance, and the world became quite a bit smaller. A few wires and coils turned out to be an invention that would tranform the world on a scale that is hard to imagine.
With that one invention, the entire world started to become connected. As long as a wire was available to transmit the signal, a person could communicate at great distances. The world was now thrown into the technological era. The new invention required a complete infrastructure to be built. Millions of miles of wire and poles needed to be installed in order to transfer the signals. Many industries benefitted from the technology. Specialized trucks were designed to erect poles and lines and to transport huge rolls of wire to the work site. Log haulers were utilized to transport the poles where they needed to be erected. Tool companies supplied the neccessary hand tools needed to make the connections and specialized harnesses and belts were needed to satisfy safety concerns. Sounds familiar doesn’t it? Although all of this started to develop over 100 years ago, it is still relevant today. Only today, instead of voice being the “something extraordinary,” it is now data in the form of video, music and pictures, as well as the written word and, of course voice.
When it all started, Ma Bell was it. If you had a phone, you got it from Bell. The phone company was what is called a monopoly. It controlled the voice over the lines. It owned the equipment. It collected the money. AT&T was originally the long distance leg of the Bell system and eventually the Parent Company. Up until 1984, AT&T was the phone company. I know so much about this because my father and all his friends were part of that company. I have been hearing about the Bell System as long as I have been alive. My dad started with Bellsouth in 1947. It was a hard job because they were building the infrastructure in all the new communities being built in the suburbs. Sometimes roads were not adequate, but the poles needed to be set and wires needed to be run regardless of whether the area was developed yet.
Everything about Ma Bell was about making money and paying its employees- at least until 1984. That is the year that the Federal Government took down the largest corporation in the world. The Bell System was broken up so as to encourage competition. It did just that. Over the next 30 years, competition created a fury of voice and data improvements. New technology seemed to relentlessly explode onto the public, and it has received it with fervor further enticing the providers to up the anti with each new offering. The following wikipedia article lists the companies that comprised AT&T before and after the breakup. Notice the spin offs. Imagine if AT&T was allowed to stay intact. I believe AT&T would still be the largest company in the world.
As far as how things are going now. With all the competition with the other cellular providers, things are not as easy as they once were. However, AT&T has a strong position. It is on the cutting edge of technology and is planning on making DirectTV part of the fold. Expanding its footprint is a logical progression in order to expand its revenue and profits. Unless the Government allows more consolidation in the system, the phone companies are faced with saturation issues and must look for other income steams. With its low PE of about 10 and a dividend yield of about 5.25%, T tends to appeal to dividend investors. The growth rate of the dividend has been about 2.3%. Keep in mind that T has seen pressure with new subscribers as of late. Competitive pricing and special bonuses used by other companies have been pressuring sales and earnings. Also, the payout ratio as of June 2014 was .68. The trend to cut prices will probably persist for a while, but pricing will eventually stabilize at some point. Sooner or later, service and attention to customers and shareholders will win out. AT&T has been around for quite some time and its roots run deep-so does its pockets. As a shareholder and son of a former employee, I feel comfortable in holding a company that has been to the Summit and still desires to climb back.
Robert the DividendDreamer
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