Christmas came early...........

Dec. 11 (Bloomberg) -- AT&T Inc. rose the most in almost five years in NYSE trading after the largest U.S. phone company raised its dividend 13 percent and announced a $15.2 billion stock buyback.

The quarterly dividend climbed to 40 cents from 35.5 cents, the biggest increase in history on an annual basis, San Antonio- based AT&T said today in a statement. The company also plans to repurchase as many as 400 million shares, or about 6.6 percent of the stock outstanding, by 2009.

AT&T is rewarding investors after three straight quarters of accelerating sales growth, fueled by acquisitions and the introduction of Apple Inc.'s iPhone in June. Today, AT&T predicted ``double-digit'' earnings-per-share growth for 2008 as users download more videos and surf the Web on their handsets.

``Clearly they believe their stock's undervalued, which is great for investor confidence,'' Wachovia Securities Inc. analyst Jennifer Fritzsche said in an interview. She said the size of the dividend boost and the buyback exceeded her expectations. The Chicago-based analyst expects the stock to perform better than its peers.

AT&T shares climbed $2.09, or 5.5 percent, to $39.99 at 10:34 a.m. in New York Stock Exchange composite trading. Earlier they rose as high as $40.03, the biggest gain since April 2003.

The iPhone helped AT&T gain 2 million new wireless customers last quarter, cementing its lead over rival Verizon Wireless. Customers who bought the iPhone use almost twice as many data services as they did before their purchases, AT&T said in documents posted on its Web site.

Acquisitions

Chief Executive Officer Randall Stephenson, who took over in June, also is bolstering profit through acquisitions, including the $86 billion purchase of BellSouth Corp. last year. Annual costs will drop by about $7 billion by 2009 as AT&T reduces overlap in operations, according to the documents on the Web.

Analysts on average project that profit, excluding some costs and gains, will be $2.77 a share in 2007 and $3.18 next year, according to a Bloomberg survey. That implies a 15 percent gain.

Third-quarter profit climbed 41 percent to $3.06 billion, AT&T said Oct. 23. Mobile-phone sales advanced to a record $10.9 billion, accounting for more than a third of total revenue.

AT&T had 126,000 customers for its U-verse television service at the end of the quarter. The company expects that to increase as much as 10-fold by the end of next year, helping Stephenson depend less on wireless service for growth as the market grows saturated. Almost 80 percent of the U.S. population already has a mobile phone.