By Sarah Perez
AT&T (NYSE:T) announced this morning that it would invest $14 billion to significantly expand and upgrade its wireless and wireline broadband networks, with its 4G LTE network expansion expected to reach 300 million people by the end of 2014. The initiative, dubbed “Project Velocity IP" (or “VIP” for short) also includes investment into AT&T’s fiber deployments. AT&T says that it will bring fiber to 1 million more business customers, covering 50 percent of multi-tenant office buildings in AT&T’s wireline service area, by the end of 2015.
The investment news comes at a time when AT&T’s landline business and Internet businesses have seen some declines. In its Q3 2012 earnings, AT&T said that its landline business fell 1.6 percent to $14.8 billion, and its Internet business lost 42,000 customers, mainly from people shutting of their DSL service. Meanwhile, revenue growth in wireless came from more people adding data plans to their wireless lines, bringing the average revenue per subscriber to $65.20, up from $63.69 the year prior.
The new $14 billion investment includes $8 billion for the wireless upgrades, and $6 billion for the wireline initiatives. The total capital spending is expected to reach $22 billion for each of the next three years, says AT&T. Revenue mix following the investment is expected to be 90 percent from high-growth areas like wireless, wireline and managed I.T. services. Revenues in wireless data, AT&T’s U-verse (TV, Internet, Voice over IP), and other business services are growing at double-digit rates, the company says, and this will bring it to even more potential customers, explains Randall Stephenson, AT&T chairman and chief executive officer.
“This is a major commitment to invest in 21st Century communications infrastructure for the United States and bring high-speed Internet connectivity — 4G LTE mobile and wireline IP broadband — to millions more Americans,” said Stephenson in a statement about the investment. “We have the opportunity to improve AT&T’s revenue growth and cost structure for years to come, and create substantial value for shareowners.”
Specifically, the company mentioned that this investment will allow it to expand newer areas of its business, including AT&T Digital Life, an IP-based home security and automation service that lets customers manage their home from mobile devices, as well as its mobile wallet initiative with Isis, and connected car initiatives. AT&T already has deals with Ford, Nissan and BMW, it notes.
The 4G LTE network expansion to 300 million people is up from AT&T’s earlier plans to reach 250 million by year-end 2013. In the 22 states where AT&T has wireline customers, the company expects its LTE network to reach 99 percent of all customer locations. The move is, in part thanks to AT&T’s 40 spectrum deals this year, some of which are still in regulatory reviews. AT&T says it also plans to buy more wireless spectrum to support the expanded LTE network. It will invest in small cell technology, macro cells and more antenna systems, as well, to increase its network density and make its wireless network more efficient.
On the wireline side of the deal, AT&T will enhance its IP network for 57 million customer locations (75% of all locations) by the end of 2015. This will include expansion of U-verse by over one-third (around 8.5 million additional customers), to bring U-verse’s total reach to 33 million by year-end 2015. U-verse’s high-speed service called U-verse IPDSLAM will be offered to 24 million customers by that time. Both versions of the service will be getting speed upgrades, too: up to 75Mbps, and for U-verse IPDSLAM, to speeds of up to 45Mbps, with additional speed increases planned for even further down the road.
AT&T says that in the 25 percent of its wireline network where it’s not economically feasible to deploy fiber, it will offer voice and high-speed Internet via LTE.