AT&T to Expand Wi-Fi Zones - Analyst Blog

AT&T Inc. (T), the second largest mobile service provider in the U.S., plans to expand Wi-Fi hotzones for its wireless network, including iPhones, to major markets. The company will expand its Wi-Fi access around Times Square in New York and introduce its first hotspot in San Francisco.

Earlier this year, AT&T deployed Wi-Fi hotzones in New York City's Times Square, downtown Charlotte, North Carolina, and Chicago's Wrigleyville to support mobile broadband in urban areas. These zones provide fast data service to AT&T customers.

Wi-Fi is gaining popularity as more customers are adopting Wi-Fi enabled devices. It is a cost-effective to wireless broadband over AT&T's 3G network. In the third quarter of 2010, AT&T handled 106.9 million Wi-Fi connections on its network, more than the 85.5 million connections that were made during full year 2009.

AT&T is pursuing mobile broadband services, which are currently the industry's most powerful growth driver. In mid-2011, AT&T plans to roll out LTE, which will offer a peak speed of 100 Mbps and cover between 70 million and 75 million people by the end of the year. Sprint Nextel (S) currently extends its 4G network in 68 U.S. markets via Clearwire Corp.'s (CLWR) network. Verizon Communication's (VZ) has recently launched its 4G services, which will be available in 39 markets.

AT&T is the exclusive provider of Apple Inc.'s (AAPL) iPhone since June 2007. The iPhone gave AT&T more subscribers even when the U.S. mobile-phone market was nearing saturation. In the third quarter of 2010, AT&T added 2.6 million subscribers, reaching 92.8 million total subscribers in service, up 29.9% year over year, driven by strong iPhone activation, rapid adoption of smartphones, strong prepaid subscribers and higher growth in connected devices. This represents an all-time high quarterly net addition in the history of AT&T.

However, the company is increasingly under pressure from Verizonaggressive anti-iPhone marketing campaigns. To strongly challenge iPhone, Verizon launched Motorola's (MOT) Droid smartphone that is based on Google Inc.'s (GOOG) widely popular Android platform. Moreover, AT&T might lose the exclusivity of its strong revenue generator, iPhone in 2011, if Verizon starts selling the device.

Consequently, we are currently recommending our long-term Neutral rating supported by the Zacks # 3 (Hold) Rank.

 
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