AT&T (NYSE:T) has turned on its 4G LTE network in Shreveport/Bossier City, Louisiana. The initiative will enable consumers to stream, download, and upload at speeds faster than in the past. In this article, I want to explain how the trend in 4G LTE revenues will favor AT&T's initiative in Shreveport/Bossier City. I especially want to show how the embedding of LTE technology in mobile and consumer devices will enable AT&T make better sales in Shreveport/Bossier City. This factor will help AT&T to improve its price multiples.
How will AT&T's fundamentals show improvement? The embedding of LTE technology in mobile and other consumer devices is driving revenues from the 4G LTE network worldwide. Juniper Research, an industry watcher, predicts 4G LTE revenues will show explosive growth, reaching more than $340 billion in four years. A lot of the revenue will be generated by the North American market. The residents of Shreveport/Bossier City will be part of the trend by paying to enjoy the embedded 4G LTE technology in their mobile and other devices. This will boost AT&T revenues and improve the price multiple of the company.
AT&T sales growth is inevitable. Its 4G LTE deployment has already boosted its wireless revenue in the company's fiscal 2013 first quarter versus the year-ago quarter. Wireless data revenues went up 24% compared with same quarter a year ago. Total wireless and wireless service revenues went up 3.4% versus the year-ago quarter. Wireless revenue enabled AT&T to report a net income of $3.7 billion, compared with $3.6 billion in the year-earlier quarter.
"Our wireless network performance continues to be terrific," said Randall Stephenson, AT&T Chairman and CEO. "And that helped drive our best-ever first quarter for Smartphone sales, improved wireless churn, and strong growth in mobile data revenues."
In the fourth-quarter report, 4G LTE drove wireless revenue to $17.6 billion, up 5.7% compared with same period in the year prior. Wireless service revenue increased 4.2% in the quarter to $14.9 billion. Wireless data revenue - driven by mobile Internet access - increased by 14.7% from the year-earlier quarter to $6.8 billion. Wireless revenue drove AT&T to 2012 full-year consolidated revenues of $127.4 billion, versus $126.7 billion for 2011.
"We had an excellent 2012," said Stephenson. "We grew revenues, increased adjusted earnings per share by 8.5%, and generated cash from operations at record levels."
AT&T 4G LTE DEPLOYMENT
AT&T's investment has created a 4G LTE network that covers more than 292 million people. The company offers several LTE-compatible devices such as tablets and smartphones. In the past month, AT&T made 4G LTE available in locations such as Corsicana and Athens, Texas; Mountain Home, Arkansas; Lake City and Ocala, Florida; Lansing, Michigan; Huntsville, Alabama; Chattanooga, Tennessee; and others.
The newly available network in Shreveport/Bossier City will deliver mobile Internet speeds 10 times quicker than 3G. It will also offer lower latency to improve services such as mobile gaming and telemedicine. "As the Shreveport region continues to grow, it is more important than ever that we have the technology we need to compete," said Patrick Williams, AT&T's representative.
AT&T needs to deploy 4G LTE to expand coverage and prevent consumers from falling back to slower 3G technologies when outside LTE coverage. Fortunately, the 4G deployment is driving wireless revenue. This is important to AT&T, as it strives to gain a head start over its rivals.
When we take another look at the wireless revenues in the recent reports, we notice that it shows year-over-year growth. It is clear AT&T's wireless revenues have been improved by 4G LTE deployment compared with the earlier year. So it can be said that the company is making progress.
With a price-to-sales ratio of 1.60, AT&T is trading cheaply, especially given its impressive 59.96 gross margin in its most recent fiscal year. The launch of the 4G LTE network in Shreveport/Bossier City, which has a combined population of 263,000, will increase overall AT&T revenue, thereby improving its price-to-earning ratio of 29.00. Investors will benefit from robust earnings that establishes a new benchmark for performance
How is AT&T performing in relation to competitors? With EPS of 1.30, compared with -1.37 for Sprint Nextel (NYSE:S) and 0.40 for Verizon (NYSE:VZ), a price to earnings of 28.96, compared with 135.36 for Verizon, and gross margin of 59.96%, compared with 43.90% for Sprint and 62.84% for Verizon, AT&T does appear to be operating at a competitive level. Recently, Sprint announced the availability of 4G LTE network to customers in 21 cities, including Los Angeles, and Memphis. AT&T's deployment enables the company to have the technology it needs to compete with Sprint. Verizon also expanded its 4G LTE network in Northwest Ohio, and other cities. The AT&T initiative will negate any advantage to Verizon as well as deliver innovations that will optimize its network for better performance.
Based on the performance of AT&T's wireless division and the revenue prospects arising from 4G LTE deployment, we can say the Shreveport/Bossier City's initiative will improve the fundamentals of AT&T. Looking at its price multiples in relation to Sprint and Verizon, we can also say AT&T is a buy for now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.