AT&T Inc. $39 - New York symbol T

AT&T INC. $39 (New York symbol T; Income Portfolio, Utilities sector; Shares outstanding: 6.0 billion; Market cap: $234.0 billion; WSSF Rating: Average) provides traditional local and long-distance services to over 61 million customers in 22 states. It also has 70 million wireless subscribers nationwide, and 14.2 million high-speed Internet customers. AT&T recently paid $6.6 billion for 700-MHz wireless spectrum licenses in a government auction. That’s equal to 39% of the $17.0 billion or $2.76 a share it earned in 2007. These airwaves can travel longer distances and penetrate thicker walls than regular 1,900-MHz cellular frequencies. That means AT&T needs fewer towers to cover the same area. The new spectrum will help the company take advantage of growing consumer and business demand for faster wireless downloads. New wireless services should generate higher profits for AT&T than regular voice calls. The company also spent $2.5 billion on its U-verse service in 2007, and will probably spend a further $2.5 billion in 2008. Uverse uses high-speed Internet technology to deliver an integrated package of services, including phone, Internet access and TV signals. These investments will help earnings in 2008 grow to $3.15 a share, which implies a p/e of just 12.4. The $1.60 dividend yields 4.1%. AT&T is a buy.