AT&T, Inc.’s (T - Analyst Report) wireless churn rate may increase in the upcoming quarter compared to the year-ago period. However, the company is likely to witness strong momentum in both its Wireline and Wireless businesses in the long run. Continued strength in the smartphone business owing to the mobile share plan is driving AT&T’s wireless business.

AT&T’s chief financial officer recently expressed fears of a considerably wider fourth-quarter churn rate compared to the year-ago period. AT&T also expects higher promotional expenses to hurt wireless service margins in the said quarter. Nevertheless, the company expects full-year 2014 wireless service margins to remain flat or show an improvement in comparison to 2013.

On the positive side, AT&T is a leading provider of WiFi (wireless broadband) connectivity, which serves as a key growth driver. AT&T remains focused on its project VIP initiative, which targets business expansion. These include completing 4G LTE deployment by 2014-end, enhancing spectrum and network capabilities, expanding broadband services to 57 million or 75% of the company’s wireline footprint, and extending U-verse services to 33 million customer locations. In addition, the company is also seeking to augment its fiber network to include 1 million additional customer locations by 2015. This project underlines AT&T’s efforts to meet the growing demand for high-speed Internet. We believe this investment program will provide the carrier with a high-potential growth platform for revenues and earnings.

Acquisitions and strategic collaborations play a major role in shaping AT&T’s growth story. In May 2014, the company had reached a definitive agreement to buy DIRECTV (DTV - Analyst Report) for $48.5 billion. The deal is expected to be a combination of cash and stock bid of $95.00 per share based on AT&T’s May 16 closing price. The transaction now awaits the approvals of regulators and DIRECTV shareholders. The planned acquisition of DIRECTV will promote AT&T to the second-largest position in the domestic pay-TV business. The takeover will increase AT&T’s video customer base by 20.3 million from its current base of 5.7 million customers. This will take its pay-TV customer count to 26 million, post completion of the deal.

AT&T currently has a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-ranked stocks worth considering in this sector include Vonage Holdings Corp. (VG - Snapshot Report) and SK Telecom Co. Ltd. (SKM - Analyst Report). Both these stocks hold a Zacks Rank #2 (Buy).