The Demise of AT&T’s 2G Network
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The end is finally here for the 2G powered network by AT&T (NYSE: T). News from reliable sources has revealed that AT&T plans to shut down its 2G network by January 1st, 2017. So what does this mean for customers and shareholders in general? Well, the impact of such a move will without a doubt have a monumental impact on the telecommunication scene not only in the United States but in the world as a whole. AT&T, which is the second largest mobile carrier in the United States after Verizon (NYSE: VZ), seeks to completely scrap its EDGE and GSM voice services and have its customers migrate to either the 3G or 4G networks, which are considered to be more efficient, within four and a half years. AT&T was keen to state that only about 12% of its subscribers, which translates to over 8 million individuals, were still using the 2G network by the end of June this year. This means that all the individuals in this bracket will have ample time to get in line with the new proposed changes should they still be interested in having AT&T as their mobile carrier of choice.
The impact of scrapping the 2G network
Now that the 2G network is about to be scrapped, many people, especially those who are not in big cities like New York, may begin feeling a little tense. This is due to the fact that as some analysts have stated, AT&T may find itself facing difficulties in upgrading certain regions that only have 2G networks available. In order to reiterate its commitment to achieving this objective, AT&T has seized entirely the sale of all 2G handsets to either contract or prepaid customers. This move has been particularly targeted to help those reluctant customers move with the changing technology, since many of the mobile carriers find themselves unable to cope with the large demand of data usage on their networks. Through encouraging all of its customers to move over to the next generation of telecommunication technology, AT&T will use the spectrum from the 2G network to better enhance the capabilities of its 3G and 4G networks. For those critics and shareholders who may think that such a move is uncalled for, they should be well aware of what Sprint (NYSE: S) has been doing before disagreeing with the move. In a bid to cut its losses, Sprint has also decided to do away with its 2G iDEN network by June next year. This means that it is not only AT&T that has seen the potential to grow as well as provide better services through the shutting down of the old networks.
The transition process
Since AT&T has committed itself to seeing this goal through, many will keep a watchful eye on how the transition process will be instigated. I believe that rivals such as Qualcomm (NASDAQ: QCOM) and Verizon will be eagerly waiting to see the outcome of this process. Verizon in particular, through a spokesman, has revealed that it has no intention of scrapping any of its networks in the foreseeable future and this may prove a bit tricky for AT&T. This is because migrating to the 3G or 4G networks does not necessarily mean the services will be cheaper, and if anything the cost may be somewhat higher. This means that should the transition process fail to satisfy the remaining number of subscribers who are still on the 2G network, there is a high probability that they will change their mobile carrier. As such, competitors such as Verizon stand to gain more subscribers, which may put a significant dent in AT&T’s revenue. In its defense, AT&T has assured all customers that the transitioning process will be handled with expertise so as to ensure that customer dissatisfaction rates are as low as possible.
All in all, I believe that this move by AT&T was not only inevitable but will also serve to better the services it provides. The time frame for complete migration to the more recent networks has been carefully thought out, and with the subsequent stopping of the sale of 2G cell phones, the vision is extremely attainable. AT&T will without a doubt increase profits through offering the services of the new networks since the need for effective data services is exponentially increasing on a daily basis.
muhammadbazil has no positions in the stocks mentioned above. The Motley Fool owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
