As tablet PC usage rises, US telecom giant AT&T (T) could see a sharp rise in its revenues from wireless data customers. AT&T competes mainly with Verizon (VZ) and Sprint Nextel (S) in the US wireless market.
We see a potential upside of nearly 11 % to our $37.91 stock price estimate for AT&T if the company’s average revenue per user (ARPU) of mobile data reaches $40 a month by the end of our forecast period, rather than the $28 a month that we currently forecast. Our analysis follows below.
In a recent interview with Bloomberg News, AT&T Mobility CEO Ralph de la Vega noted that AT&T is looking to capitalize on the tablet revolution that began with the launch of Apple’s (AAPL) iPad earlier this year. Ralph de la Vega said:
There’s going to be a huge number of tablets, different sizes, different functions.
Cisco (CSCO) plans to unveil a tablet for enterprise customers in early 2011. Dell (DELL) has already released its Streak tablet. Hewlett-Packard (HPQ), LG, Motorola (MOT), Samsung (OTC:SSNLF) and others have tablets in the works as well. It seems plausible that these devices will drive a surge in wireless data usage as networks get faster and devices grow more powerful.
Impact on AT&T
We currently estimate that AT&T’s ARPU from data will grow from an estimated $14.50 per user per month in 2009 to just over $28 by the end of our forecast period.
However, the advent of tablet PCs running on speedy 4G networks should encourage users to consume more data on cellular networks like that of AT&T. In this scenario, we think AT&T’s data ARPU could reach $40 by the end of our forecast period, yielding an 11% upside to our stock price estimate.
Disclosure: No position