With Verizon (
) racing away with its LTE expansion plans, AT&T (
) doesn't want to be left too far behind. The second largest U.S.
wireless carrier made a series of launches late last week that
helped it reach its targeted year-end LTE coverage of 150 million
Americans more than a month ahead of schedule. This came only
a month after Verizon announced that it exceeded its year-end
target of covering 400 markets and 250 million Americans with LTE.
With 2013 expected to be a big year for high-speed LTE, AT&T
has also drawn up an elaborate plan that will see it spend as much
as $14 billion on network upgrades over the next few years to
not only improve network quality and spectrum efficiency but
also expand its 4G LTE network to new markets.
The huge investment plan is a bet on the growing customer demand
for high-speed networks that can efficiently transfer large amounts
of data without clogging up. In addition to spending on
infrastructure upgrades, AT&T is bolstering its spectrum
position with a host of spectrum deals that will help it expand 4G
LTE coverage and increase network capacity. (see
AT&T Continues Acquisition Spree To Meet LTE
) As LTE adoption grows and the technology gradually
becomes a network standard, AT&T needs to catch up with
Verizon's far wider LTE network in both coverage and quality to
avoid losing market share in an increasingly saturated wireless
See our complete analysis for AT&T here
Saturated wireless market
The U.S. wireless market has become increasingly saturated with
wireless connections having exceeded the population in mid-2011.
This has made the acquisition of new subscribers, especially those
that pay for the higher-margin data plans, highly tough for
the wireless carriers. AT&T's postpaid additions this year have
been pitifully low. Last quarter, AT&T added only about
151,000 postpaid wireless connections, a figure that represents
a sequential as well as y-o-y decrease of more than 50%. While
the company laid part of the blame on iPhone 5 supply constraints,
the dismal showing is also reflective of the
broader industry-wide phenomenon of slowing subscriber
With the wireless industry getting more saturated, the focus has
shifted from acquiring new subscribers to increasing the data usage
of the existing subscriber base, and hence data ARPUs. Increasing
smartphone penetration is one way, but it entails huge
margin-eating subsidies. Increasing the coverage of its
higher-speed LTE network - while launching data share plans
that make it easier for the users to add more such devices to
the carrier's wireless network - is another way. Data share plans
will make it easier for users to add more connected devices to
AT&T's network while 4G LTE, a high-speed network, will make
subscribers use a lot more data than they used to on 3G.
AT&T starting to get serious about LTE
AT&T will therefore look to rapidly build out a nationwide
LTE network and catch up with Verizon as soon as it can. In
the long term, we do not see AT&T's lack of LTE network
with country-wide presence impacting it much since LTE
adoption has been sluggish so far. As of last quarter, Verizon
had converted only 16.5% of its subscriber base to LTE despite
having such a wide lead in terms of LTE coverage over
others. AT&T plans to complete its initial LTE roll-out
and be on par with Verizon's LTE coverage by the end of 2013.
We expect LTE adoption to start picking up only now that
the iPhone 5 is launched, and strengthen in 2013. So, longer
term, AT&T may not miss out by a lot as long as it
continues to deliver on its current roll-out plans.
An increased adoption of 4G in the long term will reduce
dependence on AT&T's 3G networks, which are under great strain
due to the heavy data usage of smartphones such as the iPhone.
Also, LTE as a network technology not only supports higher speeds
but is also more efficient than current 3G networks at
handling data, reducing maintenance and handling costs. Further,
higher LTE speeds will see subscribers increasingly use
data-intensive applications on their smartphones.
This will drive data revenues, thereby increasing ARPU levels
for AT&T over the coming years. In the near term, limited
LTE coverage may be a deterrent for many but a fallback option in
the form of the carrier's HSPA+ network, which provides higher
speeds than 3G and has a wider coverage area than its LTE network,
should offer an interim solution.
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