Verizon vs. AT&T: Which should you buy?

One of these telecoms has several significant advantages.

By InvestorPlace Jun 25, 2012 9:03AM

By James Brumley


Just to prove that I'm not strictly on a witch hunt, I'm a long-term, satisfied customer of AT&T's (T) wireless phone service. I have no plans to change that, either -- partially because of convenience, and partially because I don't want to change something that already works great for me.


As an investor, however, I gotta say: Verizon's (VZ) wireless service looks like it's going to eat AT&T's lunch.


Yeah, I know both stocks have been going nuts since late April. Verizon shares are up 12% for the time frame, while AT&T is up nearly 15% for the same period. If you dial the clock back even further, the numbers get considerably bigger for both. Part of the bullishness is apt to be a "flight to safety" mentality, but, mostly I think the market just likes what it sees.


There's a problem with that sector-wide bullishness, though -- there's not room for both at the top. The wireless market is saturated, and any growth from one of the two majors eventually will have to come at the expense of the other.


Here's why I've got a feeling Verizon is going to win the duel:



Unless it has happened in your geographical market, you might not have noticed, but Verizon has been on a partnership rampage of late. Verizon is selling Comcast's (CMCSA) cable television and broadband services in select markets, while Comcast is selling Verizon's wireless service. Each brings customers to the table the other company might not have attracted otherwise. Verizon also is partnering up with Time Warner Cable (TWC) in the same way.


It's likely a bit of a wash in terms of net revenue and net profits on a per-customer basis. But, it does crank up the total number of customers -- the "bundle" incentives are pretty compelling, which is Verizon's best shot at winning customers away from well-established competition (people like me, who otherwise have no desire to bother switching carriers). It's on pace to offer the bundle/incentive to dozens of major markets.



Another confession: I don't care whether my mobile web connection is 3G or 4G. But apparently, I'm in the minority. It matters, because Verizon now offers 4G LTE (long-term evolution) connectivity in 304 markets, where AT&T has a 4G LTE presence in only 39 markets. AT&T offers a 4G HSPA+ connection in more markets, but that's a slower technology than LTE.


If you've not compared one against the other, trust me -- there's a difference. The 4G LTE gets the most out of a smartphone, and anything else turns them into expensive paperweights.



Speaking of speed, Verizon's FiOS (fiber optic service) is getting crazy fast. Where available, this top-shelf Internet connection is piping digital data into homes at a rate of 50 megabits per second to 75 mbps. (For perspective, just three years ago, 10 mbps was a big deal.)


Critics have worried that higher charges for the high-speed service would cause customers to balk. But given how much Verizon spent to build the FiOS infrastructure, there wasn't a lot of choice -- the company has to pay for it somehow. Thing is, the extra $10 to $15 added to customers' monthly bill hasn't been a big stumbling block; market penetration is increasing. Consumers seem to see the value of (and are willing to pay for) higher speeds, now that they're needed to handle huge digital content loads.


Mobile pricing

Last but not least, the revamp of Verizon's mobile pricing plan has been questioned by many. The company has decided to offer a so-called "Share Everything" plan, where families share one huge data plan among several mobile phone owners. If you read the fine print, though, it's apt to be a price increase overall for these plans, on a per-user basis.


Although AT&T has all but said it will follow suit, industry experts suggest this new pricing scheme could send business to second-tier players like Sprint (S) and T-Mobile, if they maintain cheaper or unlimited data plans. As such, this is deemed a huge risk for Verizon.


There's a key point being overlooked about the new pricing scheme, however -- it's actually reflective of the way people use (and pay for) mobile now ... which is less for voice, and more for data. Oh sure, prices will move higher across the board, as this is just a nicely packaged wholesale price increase. That's likely going to happen no matter who the carrier is, though. Despite grumbling, this isn't going to trip the company up.


Bottom line

It's odd, when you stop to think about it. Verizon hasn't done anything magical that AT&T couldn't have copied, other than perhaps leverage its superior size. It simply has done some creative packaging, and has had faith that a superior product will draw a bigger crowd.


It's nice to see those "old school" ideas haven't gone out of style.


As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


More from InvestorPlace

Jun 25, 2012 1:15PM
Both companies have ripped the consumers off by adding fees to your monthly bills (go on line and look at both companies under thier company name then laww suits )you can see how dishonest both these companies really are and how our state government lets them get away with it.
Jun 25, 2012 2:44PM
Honestly I dont see anything really superior about either one of them.  There is not much competition and these companies can dictate the price for everything.   I still think its highway robbery to charge so much money for data.  I can see a network of wifi access points going up around cities so that people dont have to keep worrying about their minute usage.

I personally think they should stop subsidizing phone prices and just reduce the money for the data plan and voice plan like the rest of the world.
Jun 25, 2012 10:59AM
He should have mentioned that Verizon is a more expensive stock with a higher P/E.
Jun 25, 2012 12:25PM
T-Moble is horrible. I had their service for 8 years and it got worse every year. What a waste of money that was. You get what you pay for, in t-moble's case you overpay for nothing. You are right, cheap all the way around but if it does not work it is really overpriced.
Jun 25, 2012 3:19PM
Jun 25, 2012 2:59PM
Sprint sucks around here(Alabama) so that's a no go. Verizon and ATT are about the same coverage here and are pretty close until you have several phones on your line and then you can't beat ATT. I'm not real happy with ATT but with the price differance and what is available here that's the way you have to go.
Jun 25, 2012 2:00PM

In my opinion, this piece has a few flaws in it's logic to buy Verizon over AT&T.  One is that although bundling has it's advantages, partnering with Comcast could lead to problems.  I know firsthand how awful Comcast is at customer service.  If I were Verizon, I wouldn't want to get mixed up in Comcast's ineptitude. 

The second "flaw" is the speed/price issue.  I have T-Mobile and the speed seems fast enough for most people.  Do people really crave lightning fast results for over $100/mo, or will they be happy at fast for $50/mo.?  I would be hard-pressed to bet on the former. 

Jun 25, 2012 11:09AM
Why not invest half your dollars in AT&T and the other half in Verizon. Problem solved.
Jun 25, 2012 11:07AM
SPRINT baby all the way!  Although if I had to pick between At&T and Verizon it would be AT&T hands down. 
Jun 25, 2012 4:27PM
Stay the hell away from Sprint.  They are the worst company in the nation and I hope they go bankrupt.
Jun 25, 2012 2:17PM

ATT has done me bad twice, and I was never late once paying a bill. Their customer service is the worst and if they offered me a free plan I would have to think long and hard. Given a choice, the big V, but then again I have T-Mobile who has always taken care of me. Glad that sale didn't go though.

Jun 25, 2012 5:05PM
Anyone who is satisfied with AS&S, oops I mean AT&T should consider themselves fortunate. I had to switch from Verizon to A$&$ after relocating and found out why A$&$ is the subject of so many class-action lawsuits. Their biggest accomplishment was to make me miss Verizon, which was not the greatest company I've ever dealt with, but A$&$ had horrible customer service, glacial response to service calls, sleazy overbilling practices and a charming habit of sending disputes to collections with no warning. I wouldn't do business with them again and I wouldn't buy their stock - I don't care how high their dividend is. They were without a doubt the slimiest corporation I've ever dealt with, and that is a real achievement.
Jun 25, 2012 4:37PM
Neither one, they are both to high!!!!!
Jun 25, 2012 5:26PM

T-mobile are a good customer service company with very reasonable plans. If you call them up you will do better than the advertised or packaged plans. They have excellent coverage but not as good as Verizon or AT&T. If you live in a metro area and don't go to rural, you will have same coverage as any of the big bells. Customer service at Verizon has been by far the worst of ant of the top 5 mobile companies. AT&T have fallen behind on technology and wanted to buy T-Mobile for a quick catch up.

As I've said on other posts on this matter "If you want to be a sheep and follow the herd throwing away at least 40% too much money every month. This amounts to thousands of dollars over just a few years." If that makes you happy, Its your money fool.

Jun 25, 2012 11:22AM
Are you getting unlimited data, text and web?  NO!  Sprint is the way to go.  I've been a customer for 3 yrs on the everything plan and have no regrets.
Jun 25, 2012 6:02PM
Verizon has been the best, Can use my phone a state away , and not charged roaming,  My whole family is on a shared plan and can change any part of my plan monthly.  Considering where phones were just 5 years ago, as far as price, The fee is reasonable.
Jun 25, 2012 5:34PM
if Verizon is like Metro Pcs everyone would go to Verizon
Sprint,AT&T all these Cellar phone company is to high they need to 
cut  the price down have better plan that be every ones dreams
Jun 25, 2012 11:54AM
just left verizon for t-mobile

cheaper all the way around
Jun 25, 2012 12:40PM

Anyone that says "T-Mobile is horrible" is one of two things: 1. living in a rural area which, admittedly, is not T-Mobile's strength. 2. A liar.


I've been with T-Mobile for 7 years and absolutely love them. They have a great selection of phones, their 4G HSPA+ 42 service is ridiculously fast and because I live in a major metro area I get coverage in 99% of the places I go. The 1% where I don't is usually visiting my parent's farm, which I knew was not covered when I signed up... so my expectations are realistic. The fact that they are cheaper, in practice, than the big 3 is a perk. That's not why I chose them, and it's not why I stay with them.


And anyone that legitimately tries to argue that Sprint's unlimited data offering matters in the slightest is clueless. Sprint's EVDO and WiMax networks are so overloaded and slow (because they're overloaded) that even if you have "unlimited" data, you're limited by the fact that you can't download very much in the time you have. And luring customers with the iPhone isn't going to help that.

Jun 25, 2012 11:30AM
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