AT&T Thriving Amid Fierce Competition

Jacob is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

AT&T (NYSE: T) provides Wireline and Wireless communication services to more than 100 million subscribers in America. The company launched its famous video service "U-verse" in 2006, which has registered double-digit growth in the last three years, that has immensely helped AT&T to offset the declining revenue growth in the wireline voice segment of its business. 

Financials A Temporary & A Mild Setback

The second largest carrier in the U.S. posted consolidated revenues of $31.5 billion, flat compared to the corresponding period in 2011. The major revenue drivers for the company were wireless, wireline data and managed IT services. All the factors contributed around 81% to the total revenue, which increased by 6.4% compared to the third quarter 2011.

iPhone - A MAJOR CONTRIBUTOR

The second-largest carrier in the US revealed 4.7 million iPhone activations — though, the company did not differentiate between sales of the new devices and activation of  any used or unlocked phone device that may have subscribed to AT&T network.

AT&T sold a total of 6.1 million smartphones, trailing the 6.8 million smart phones Verizon  (NYSE: VZ)  sold last quarter. AT&T holds that it experienced a “record sales quarter” for Windows and Android phones; it is obvious that iPhone is the bigger part of the picture at AT&T than it is at its competitor’s Verizon.

Overall, the carrier added 678,000 net new customers in Q3, more than double the number added in Q2 —this totals to 105.9 million subscribers, escalation from 100.7 million a year ago. Smartphones contribute 63.8% of the company's postpaid subscriber base, serving to boost data revenues by 18.3%. Overall, it helped the company reap $3.6 billion in profit for the quarter.

Buzzing Competition

As Verizon is on the verge of completing its 4G – LTE build out, there is every reason to believe that Project Velocity IP will enable AT&T minimize the disparity between its 4G-LTE footprints and that of Verizon. AT&T's Project Velocity IP will require an investment of $14 billion over the next three years. As of now, it remains to be seen whether this represents an addition to AT&T's capital investment budget over the next three years, or if it is just an appropriation portion of AT&T's existing capital investment budget.

Sprint Nextel (NYSE: S) has opened the front by kicking off its 4G-LTE operations. Four of the first five cities to get Sprint 4G-LTE service were Dallas (AT&T's Corporate Headquarters), Atlanta (AT&T Wireless's HQ), San Antonio (Former Headquarters of AT&T's predecessor SBC), and Houston (the third largest city in AT&T's ILEC footprint). Sprint's 4G LTE Network lately started in the Chicago land area (Ameritech's former HQ), and now Sprint is planning to bring 4G-LTE to Oakland (PacBell was headquartered one town over in San Francisco), Los Angeles (the largest city in AT&T's ILEC footprint), and Indianapolis (Indiana Bell's HQ).

Investments

AT&T Mobility is looking forward to expand its 4G-LTE coverage to 300 million consumers by the end of 2014, which turns out to be 50 million more than in the past, and will be as good as Verizon's 4G-LTE coverage area.

AT&T Wireline will be allocated $6 billion in order to enlarge its U-Verse telecommunications services triple play. U-Verse was launched in June 2006, and it includes high-speed internet, IP telephone, and IPTV services.

Upon the conclusion of Project Velocity IP, AT&T Wireline is expected to offer 90% of its U-Verse region 75 megabits per second, while 75% will receive speeds of 100 megabits per second.

On the completion of the investments, 90% of the company's overall revenue will be obtained from its high-growth area, with the carrier set to discontinue traditional phones and landline connections.

In the recent development Akamai Technologies, and AT&T entered into a strategic alliance to deliver a global suite of content delivery network solutions to companies. The end customers are expected to get the benefit from more effective routing and better delivery of digital content, video and web applications which would conclude to better user experience

FCC Approval

Recently AT&T announced that FCC has approved its awaiting acquisition of the Nextwave Wireless and other pending WCS spectrum acquisitions. AT&T plans to deploy WCS spectrum for added 4G LTE capacity in three years. The transaction is expected to be closed during the first quarter of 2013.

Conclusion

The versatile portfolio of the company and its performance in 2012 makes the telecom tycoon a stock to hold. AT&T has a promising outlook with increased revenue and potential for growth in the coming years. The company has approximately 4 million T.V. subscribers on its U- verse service. The company announced that it could be the carrier of Samsung's Galaxy SIII and is looking forward to enhance the revenues from Apple as well.


valuewalk has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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