By Sheena Lee
AT&T (NYSE:T) may have exclusivity on the iPhone (NASDAQ:AAPL) for now, but complaints about dropped calls and slow internet loading times have turned-off many users. This week, the telecoms operator showed that it is trying to step up its game and has agreed to buy Qualcomm’s (NASDAQ:QCOM) wireless spectrum for close to $2 billion.
Analysts said the acquisition will give AT&T more bandwidth and will allow the provider increased capacity for fourth-generation services, as competition will soon heat up against Verizon Communications (NYSE:VZ), which will also be selling iPhones early-to-mid next year.
Craig Moffett, an analyst at Sanford C. Bernstein & Co. who rates AT&T shares Market Perform, said:
The Qualcomm spectrum will help AT&T alleviate network- congestion problems such as those experienced by its customers who use Apple’s iPhone. This is very high-quality spectrum…It’s especially concentrated in the urban areas. It provides a very strong signal inside buildings and it’s extremely good at penetrating walls and windows.
Moody’s Investors Service raised its outlook on AT&T, citing better performance and efforts to cut down its leverage the past couple of years. Moody’s Vice President and Senior Credit Officer Gerald Granovsky said:
AT&T’s ability to restore its leverage to levels consistent with it’s A2 rating is a testament to the strength of the company’s business model and the resiliency of its cash generating capability amid increasing competitive challenges.
So far, sell-side analysts have not changed their 12-month price targets since our Nov. 11 prognosis on the company.
Munster expects that Verizon will sell about 25 million smart phones in 2011, and just 36 percent, or 9 million, will be iPhones. In 2012, Munster forecasts a total of 78.3 million iPhones sold, with AT&T and Verizon each selling around 14 million.
Giga Om’s Kevin Tofel said Verizon needs to come out with the iPhone sooner than later, based on a recent report by ITG Research. Tofel pointed out:
…the numbers are alarming for Verizon because it means Verizon’s entire smartphone portfolio is getting outsold by Apple’s iPhone on the AT&T network. And more consumers, not fewer, are buying smartphones, with some estimates suggesting 50 percent of U.S. mobile subscribers carrying a smartphone by this time next year.
Verizon may soon have another weapon against AT&T, according to Kaufman Brothers analyst Shaw Wu, who suggests that Research in Motion (RIMM) devices using the BlackBerry 6 operating system may be introduced by Verizon Wireless between January and March. Wu speculates it may be the BlackBerry Torch handheld, or a similar style of device, according to Tech Trader Daily.
Disclosure: No positions