NEW YORK - AT&T Inc. on Tuesday raised its dividend 12.7 percent, announced a share buyback and set a long-term target for its TV service, which is delivered over phone lines, saying it will be available to 30 million customers by 2010.
Shares of the telecommunications company jumped more than 6 percent in morning trading.
At a conference with analysts in New York, AT&T touted a turnaround in its once-shrinking business of serving corporate clients, as well as strong performance from its wireless division. It expects revenue to grow around 5 percent next year.
The company said it will buy back 400 million shares, which represent about 7 percent of the company's stock, would cost $15.16 billion. AT&T said it expects to complete the repurchase by the end of 2009.
The company said the new repurchase plan supersedes an existing one announced in 2006. AT&T bought $13 billion in shares under that authorization.
AT&T's dividend will rise to 40 cents from 35.5 cents. It will be paid Feb. 1 to shareholders of record on Jan. 10. the telecommunications company said Tuesday.
AT&T shares rose $2.41, or 6.4 percent, to $40.31 in morning trading Tuesday.
UBS analyst John Hodulik said Wall Street was expecting a buyback, but the size was bit larger than expected.
"They're generating a lot of cash and have to do something with it," Hodulik said. He said management also probably looks at the company's own stock as a good value, after falling from around $42 in October.
The TV announcement by chief executive Randall Stephenson reinforces AT&T's commitment to the service, known as U-verse. Recent news reports said the San Antonio-based company was in talks to acquire satellite TV broadcaster Dish Network Corp., formerly known as EchoStar Communications Corp., which would have given AT&T ownership of a different route to reach customers. However, those talks have likely been shelved because of federal anti-collusion rules surrounding a spectrum auction that will start in January. AT&T already resells Dish service.
Stephenson told analysts the new U-verse buildout target includes customers in the Southeastern states formerly served by BellSouth Corp., which AT&T acquired late last year.
AT&T also said it aimed to have more than 1 million U-verse at the end of 2008. It had 126,000 subscribers at the end of September, the latest figures it has released.
The U-verse rollout has been delayed several times. A month ago, AT&T trimmed its coverage target for the end of next year to 17 million homes from 18 million. The delay was due to a shift in resources to the former BellSouth.
U-verse has also had some technical problems, but AT&T said customer trouble contact rates have been cut in half in 2007.
AT&T expects to spend between $4.5 billion and $5 billion on U-verse through 2008. The deployment is expected to reduce 2008 earnings by 12 to 14 cents a share.
At the analyst meeting, Ralph de la Vega, the head of AT&T's wireless division, addressed Verizon Wireless' announcement two weeks ago that it would open its network by the end of 2008 to any devices that pass a technical inspection.
De la Vega emphasized that the Global System for Mobile, or GSM, network technology that AT&T uses already means customers can connect any compatible device by inserting a Subscriber Identity Module, or SIM chip.
"AT&T is the most open carrier in the U.S.," de la Vega said. "Open access is a change only for non-GSM carriers."
Verizon Wireless' plans go farther, however, in that they plan to allow device manufacturers to buy wholesale access and deal with end customers themselves, while AT&T envisions keeping the customer relationships. Verizon Wireless is a joint venture of New York-based Verizon Communications Inc. and Vodafone Group PLC of Britain.
Google Inc. made another big splash in the wireless world in November, revealing a project to create a software package for cell phones. AT&T is not a member of Google's alliance, but de la Vega noted that company already carries phones with six different operating systems and would evaluate Google's software, called Android, on the same basis.
But in comments on the sidelines of the conference, de la Vega indicated that he had higher expectations for Apple Inc.'s iPhone, which is exclusively carried by AT&T in the U.S. Apple has said it will make it easier next year for third-party developers to make software for the phone, which is now a relatively closed platform.
"The jury is still out on Android," de la Vega said. "I think Apple has the right model."
