Exploring Mobile & Data Trends at AT&T

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AT&T ( T ), which competes primarily with Verizon ( VZ ) and Sprint ( S ) in the mobile business, owes 45% of its estimated value to its mobile plans & phones division by our estimates. This division essentially derives its revenues from 4 key business sub-segments. These include postpaid voice, prepaid voice, data and sales of handsets. Below we present two charts that demonstrate the revenue contribution of these sub-segments today and how these could look in the future. While forecasting too far in the future is tricky, we hope to identify how certain trends can contribute to the stock in the medium to long term. Our current price estimate for AT&T is $37.84 .


Key Trends Behind the Change

Explosion in consumption of mobile data : This is driven by increasing adoption of smartphones that make it easy to access the internet as well as encourage the use of applications that increase data usage. To complement this, there has been a general trend of increased internet usage driven by better speeds, coverage, popularity of social networking sites and increased availability of media content. Additionally connected devices like e-readers, alarms, GPS systems, etc. further add to mobile data consumption.

Pricing Competition: The competition has been intense in the mobile industry and there have been voice ARPU (average revenue per user) declines over the past few years, though this has been offset by increased data ARPU. Players like Sprint have been looking to expand its subscriber base by offering attractive voice pricing, which has resulted in AT&T and Verizon moderating their own prices as well. We expect price competition to continue and for voice revenue growth to moderate while data revenue grows.

Tiered data pricing could potentially alter this picture. Due to data caps, many data users might be tempted to go for lower priced plans, thus slowing down data revenue growth relative to our expectations. Regardless of data growth, we expect postpaid voice to remain the highest share of the pie and to remain the core offering of these mobile operators.

Do you think the picture could be different?

We invite you to our platform to reflect your opinion by changing future estimates and letting others know.

You can see the complete $37.84 Trefis price estimate for AT&T's stock here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: CMCSA , S , T , TWC , VZ

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