), the second-largest U.S. mobile service provider, seeks to enter
the U.S. home security and automation market this summer. The
service will be initially run on a trial basis in the Dallas and
AT&T will offer automation, energy and water controls, and
security services through a system known as "Digital Life". Using
high-speed Internet services, Digital Life will provide remote
access to an entire home with its features that will include video
cameras, door locks, sensors, moisture detection, lighting controls
and thermostats. The hardware was developed by Xanboo, which was
acquired by AT&T in 2010.
The demand for home security and automation services is growing
rapidly in the U.S. According to BCC Research, the home automation
systems and devices will see significant growth over the next few
years. It is expected to grow at a compound annual rate of 10.5%
over the next five years.
In a saturated market, the U.S. carriers are now looking at new
avenues for growth, beyond the slowing mobile business. Several
cable companies including
) and telecoms operators like
Verizon Communications Inc.
) have already entered into the home security market.
AT&T's entrance into the home-security market will be a
Tyco International Ltd.
) ADT unit, which dominates the industry with a 25% share. These
services are expected to add $1 billion to AT&T's annual
AT&T's decision to enter into the home-security business was
an outcome of its plan to improve its growth profile. The company
is also shedding some of its slower-growing assets or restructuring
underperforming or non-strategic assets such as the directory
business and rural access lines. Last month, AT&T announced the
sale of 53% stake in its Yellow Pages business to Cerberus Capital
Management LP for $950 million. The deal, pending regulatory
approval, is expected to close mid-year.
Going forward, AT&T will continue to focus on its core
wireless, IP, cloud and application-based services. The company is
expanding in faster-growing markets such as mobile data and
broadband through Long Term Evolution (LTE), U-verse IPTV and
advanced television offerings.
We are maintaining our long-term Neutral recommendation on
AT&T. The company retains the Zacks # 3 (Hold) Rank for the
short term (1-3 months).
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