Bought AT&T After Selling Verizon

5G technology is coming to limited locations in the back half of 2018 with hopefully a wider rollout in 2019 across most of the U.S. This technology is promising enough to disrupt and change many aspects of society including autonomous vehicles and virtual and augmented reality. Both AT&T Inc. (T) and Verizon Communications (VZ) are leading the charge in their areas for rapid expansion, and both should be focused on 5G in the back half of 2018, especially if AT&T's longstanding fight to acquire Time Warner Inc. (TWX) gets resolved on June 12th. With AT&T at markedly depressed levels from the uncertainty of the merger, it appears to be an especially attractive value at this time, compared to its main competitor Verizon, making it a potential better buy at this time, especially if you think the merger will go through for Time Warner.

As leaders in the move towards 5G, Verizon and AT&T are set to launch mobile 5G in over a dozen markets in 2018. This launch will be spurred on by the new radio standards from 3GPP, the international standards body regarding 5G. Setting up these standards was essential before the companies could build and deploy their technologies in key U.S. cities.

Hank Kafka, VP of Access Architecture and Analytics at AT&T said in a techblog article,

We��re proud to see the completion of this set of standards. Reaching this milestone enables the next phase of equipment availability and movement to interoperability testing and early 5G availability.

With new standards now set up for many aspects of 5G in place, AT&T believes it can be a first provider to almost a dozen markets later in 2018 after conducting 5G trials in Austin and Waco in Texas, Kalamazoo in Michigan, and South Bend, Indiana in 2017. 5G technology promises to bring much faster speeds and ultra-low latency while making future technology like virtual reality, autonomous cars, the IoT (Internet of Things), and immersive 4K video more mainstream options. Verizon also plans to launch in 3-5 key markets later this year after initial trials in 11 markets. Both AT&T and Verizon look to lead the charge towards 5G while the U.S.'s other big telecom companies, T-Mobile US Inc. (TMUS) and Sprint Corporation (S), focus on starting a complicated $26B merger process. Getting past regulators easily could take a year or two to complete, if it ever gets approved, while Sprint and T-Mobile try to consolidate their companies and build out 5G technology at the same time.

With 5G coming more into focus in the back half of 2018, AT&T is more than ready to end its $85 billion acquisition of Time Warner, which was first announced back in late 2016. This drawn out saga of AT&T versus regulators, even thought it is more of a vertical merger compared to a horizontal merger like the Sprint and T-Mobile looks to be, looks to finally be coming to a close on June 12th. The expected conclusion of the main antitrust trial, before potential verdict appeals, should help to clear up much of the uncertainty surrounding AT&T, as there will finally be an official ruling on the case, instead of the endless back and forth. Since the deal was announced in October of 2016, AT&T's stock has had a rough time getting any type of traction going while most of the rest of the market around it experienced a tremendous run.

T data by YCharts

I think now might potentially be a great time to get into AT&T stock as the uncertainty is officially about to end, and there is already quite a lot of downside built into the stock from an almost chronic underperformance over the past year and a half. Many of the fundamentals of AT&T are just as good as they were in 2016, but a long drawn out fight against regulators over what looked to be a done deal on paper has had its toll on the company. If the deal is approved in June, I wouldn't be surprised to see a 10%-15% jump in the near-term price of AT&T's stock whereas, if it fails, I would think the downside would be most likely limited to the single digits for a short time, before an eventual possible recovery as AT&T turns its attention to other issues such as a new possible acquisition target or rapid 5G expansion.

Here are some of the main comparisons between Verizon and AT&T, according to Charles Schwab, which have helped in my decision to drop Verizon's stock as a core sector holding in favor of AT&T's, after its remarkable drop in value.

Comparison	Verizon	AT&T
Market Cap	$197B	$196B
P/E	13.67	19.08
Forward P/E	10.4	9.42
PEG	2.81	1.63
Dividend	4.94%	6.24%

Table by Trent Welsh

Right now both Verizon and AT&T are of similar size, with AT&T making a marked jump in size if its $85 billion Time Warner acquisition gets approved next month. Verizon on the other hand, has had its focus on more bite sized acquisitions including the former AOL for $4.4B and Yahoo for $4.8B now labeled under the brand name Oath. AT&T's growth looks to outpace Verizon's in the future with the company's forward P/E ratio under Verizon's while sporting over a full point lower PEG ratio marking its growth as "cheaper" than Verizon's, which is a good thing. Finally, after AT&T's drop in share price over the past year and a half, there is a very attractive difference between the two companies dividend yield, which is one of the main reasons to hold these kinds of stocks in the first place in my opinion. I sure didn't complain owning Verizon's dividend at approximately 5%, but I will be more than happy to now have AT&T's 6% + dividend now as a core holding in this sector.

Both AT&T and Verizon are at the forefront of 5G rollout amongst U.S. telecom companies, which could be a game changer for many U.S. companies in the future. After AT&T's acquisition issues concerning Time Warner though, its value is too much to pass up, as its prospects going forward look to become far more clear in mid June. One of the main reasons for me to own a telecom company, besides diversification exposure to the sector, is an attractive dividend yield. This noticeable difference in yield is what ultimately helped me switch my long term core holding from Verizon over to AT&T moving forward. Best of luck to all.

Disclosure: I am/we are long T.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.