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Tickers in this Article: T, AAPL
No longer content to be the value king of the telecommunications sector, AT&T (NYSE:T) has set its sights on the cable market as an area ripe for expansion.

The move follows an aggressive effort to gain market share in the wireless industry since the launch of Apple's (Nasdaq:AAPL) iPhone. Two new hunting grounds mean the old telecom dinosaur is ready to grow.

Increased Value
AT&T announced in December that its board of directors approved a 12.7% increase in the company's quarterly dividend. This is the largest annual dividend increase in the company's history, and will push dividends from 35.5 cents per share to 40 cents per share on a quarterly basis. That's $1.60 per share on an annual basis.

This dividend increase should shatter any doubts about AT&T's recent growth, since the increase almost doubles the 6.8% dividend increase approved in December 2006. The company also authorized a corporate stock repurchase plan of 400 million shares that will be completed by the end of 2009. At current prices, this program represents roughly 6.6% of AT&T's outstanding shares, and should be a huge confidence booster for investors. (For related reading, check out A Breakdown Of Stock Buybacks.)

Growth Not On Hold
In its recent forward guidance press release AT&T management said the company expects to deliver continued wireless revenue growth in 2008, which will include revenue from its recent acquisition of Dobson Communications. The company also expects continued wireless growth, combined with increased expense savings from merger synergies, to bring its consolidated operating margin up to the 25-26% range, which will be a 2% increase from 2007.

All this amounts to an expected double-digit percentage growth in earnings per share for the year, and growth in free cash flow to the $16-17 billion range. All of these projections seem feasible, and if AT&T can deliver half of the goals mentioned above, then I would argue this stock is set to see some serious price growth. (To learn more about these ratios, see Zooming In On Net Operating Income.)

The New Smart Phone
On February 19, AT&T released its new phone, the Palm® Centro. This is the first reasonably priced smart phone to come out, costing consumers only $99. The Centro allows voice, texting, instant messaging, e-mail and the web. It features a color touch screen with a full keyboard. The phone is also the first product to combine all the aforementioned services with XM Radio Mobile, push-to-talk and MusicID.

This phone is the combination of all the beauties of the Palm Pilot and all the services of AT&T. The Centro stacks up as a formidable competitor to the iPhone. With inflation on the rise and consumer confidence at a low, I think the $99 Centro smart phone is bound to be a hit. If the iPhone was a wild success at $500, then there is no telling how popular the Centro will be.

Expanding The Cable TV 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 compete with the large cable providers like Comcast and Adelphia, and is expected to deploy U-verse to approximately 30 million homes across 22 states by the end of 2010. AT&T anticipates that U-verse will represent a multi-billion-dollar revenue stream by 2010.

This is a major undertaking, and if it is done right, it could take AT&T one-step closer to its communications conglomerate roots. The U-verse projections could be a bit on the lofty; however, AT&T has done some pretty amazing things over the last couple of years. It may not succeed in breaking into the television oligopoly, but one thing is for sure, it will give a valiant effort.

What's the Bottom Line?
With AT&T's revived operations and aggressive expansion plans it seems to be on the right track for growth. It's impressive that the company had enough cash on hand to increase its dividend, jump into new phone projects and attempt to break into the cable business, all at the same time. The company is seeing opportunities and is not afraid to bulldog its way into a top spot, and with that in mind I think the stock is poised to see solid growth in 2008.

For related reading, check out Conglomerates: Cash Cows Or Corporate Chaos?

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