AT&T (T) Looks Overseas For Growth

Shares in AT&T (T) are up 70% over the last two years. The S&P is up less than 20% for that period.

But, the big telephone company may not be able to duplicate its stellar stock performance going forward. The company’s core landline business is unlikely to grow at all. As a matter of fact, it may shrink. Virtually every home in the US has a phone and cable VoIP is taking customers away from telecoms.

In the cellular business AT&T Wireless is a huge money maker. The company has well over 60 million subscribers. But, industry estimates are that there are 250 million active handset in the US against a population of 300 million. The growth in wireless is likely to slow.

AT&T is entering the fiber-to-the-home broadband and TV business, but it is too early to say whether its can take significant market share from cable companies.

So, AT&T is going the one place that telecom growth is still robust–Asia. According to Reuters, the US company plans to put money into the wireless unit of Telekom Malaysia which is "spinning off its mobile business into a separately listed firm, TM International, which will include its domestic Celcom unit and operations in nine other countries, including India, Indonesia, Bangladesh and Sri Lanka."

Telecom growth in the US may be nearing a period of more modest growth, but AT&T can offset that by moving investment overseas. It may not be as simple as that. China, southern Asia, India, and Russia are the last frontier of rapid telecommunications growth. That means that AT&T will be running into other international companies like Vodfone (VOD), Verizon (VZ), and Deutsche Telekom (DT).

Growth in the industry may be outside the US, but those dynamic asset may come dearly.

Douglas A. McIntyre