AT&T (T) is transitioning like all big carriers from sales numbers revenue to usage revenue. Even though the industry has not quite reached a saturation point, smartphone usage is well above 60% for all the carriers including AT&T. As we move into the data usage age, this is where revenue is going to come in. AT&T is evolving and has some creative ideas as it tries to move step in step with technological advancements. Let's explore some of those revenue streams AT&T is moving into.
4G + Cloud
AT&T is planning on combining a fast 4G network plus cloud services designed to allow users to access content from anywhere. Chief Executive Officer Randall Stephenson said at the Mobile World Congress in Barcelona:
"We' at the beginning of a new era, and it's an era that is being defined by LTE and the cloud."
AT&T has stated that they have experienced a 30,000% increase in data usage over the past six years because customers are using their mobile phones to check emails and even watch videos now. The combination of 4G with the cloud will enable customers to stream "stored data" from cloud services at faster rates with less delay. The company believes that the future telecom and mobile service will require better infrastructure to handle more data storage and investments in spectrum and network. By the end of 2017, it has been estimated that there could be almost 9.7 billion wireless connections worldwide which includes handsets as well as wireless connections in automobiles.
Analysts at AT&T believe that by the end of 2016, 50% of all new cars will have some sort of wireless connecting opportunity associated with them. An example of wireless connections and the automotive industry would be the alliance just formed by AT&T and General Motors (GM). By 2014, AT&T will start offering high-speed LTE network services to General Motors cars. General Motors has its OnStar service to which AT&T will provide 4G mobile Internet access. Not only will it upgrade the OnStar service but will also be able to provide streaming audio and videos.
Mobile Advertising Revenue
Last December AT&T and Verizon launched location-based marketing services - AT&T Alerts and Verizon Select (VZ). As an example, let's take AT&T alerts: AT&T wireless customers would simply text the word "JOIN" to ATTAlerts in order to pop into the service, and started receiving discounts and other offerings via text message when they are near participants. The system uses geo-location technology and also what consumers prefer in order to provide rewards and offerings to them without them having to download apps.
These launches are the beginning of something bigger for both telecommunication companies as they may be able to tap into a larger revenue source through mobile advertising. The FTC (Federal Trade Commission) is urging Congress to pass online private legislation protect consumer information. What does this mean for both telecommunication companies? If the telecom companies can put their lobbyists to work, the playing field would be equalized with Google (GOOG) and Facebook (FB) when it comes to collecting and using consumer information relative to Internet-based advertising.
If and when this does happen, it is going to give AT&T a grand opportunity to increase revenue on all smartphone customers, but this is not the only opportunity the company has. Presently, 70% of its postpaid customers use smartphones, so it still has 30% growth in the smartphone sales sector which is quite a bit. In fact, in the fourth quarter, 90% of sales were smartphones.
The use of the smartphone also means possible growth through data usage. Like the other carriers, AT&T has realized that the increase in data usage also creates more revenue opportunities. The mobile share plan that AT&T introduced is designed to handle this as more and more data-oriented devices are added to the AT&T customer's system. As data usage per customer increases, the opportunity to increase this revenue source is also available to the company and it is well-positioned to take advantage of that.
Since February, the stock is really focused on a bullish run. It was moving up and down in an elongated peak and valley bullish pattern before this. The RSI indicator has stayed well above the 50 line showing strength in the present move, and after the same manner, the MACD indicator has also stayed well above its zero line. It also appears that the stock is using the middle Bollinger Band as support, and if this is the case, is the third signal of a very strong upward move by AT&T. My observations point to a very bullish stock right now.
AT&T's revenue growth is all about usage. And how they stimulate the use of data is going to be the key to its growth and future. Presently, it does have promotions to get customers to buy tablets to increase data usage. I believe that AT&T will creatively market its shared usage plans and set itself up for a good revenue producing future.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.