TVTechnology

AT&T Pledges $14 Billion for Broadband Expansion

11/7/2012

NEW YORK: AT&T today announced plans to invest $14 billion in its broadband infrastructures over the next three years. The investment plan, dubbed Project Velocity IP, or VIP, is intended to expand AT&T's growth platforms and drive revenue and earnings per share growth.

“Revenues in our key growth areas—wireless data, U-verse and strategic business services—are all growing at a strong double-digit rate,” said Randall Stephenson, AT&T chairman and CEO. “Project VIP expands our potential in these key platforms and makes them available to many more customers. With our strong balance sheet, these capital investments are manageable.”

Stephenson also announced that AT&T would increase its quarterly dividend for the 29^th straight year. Shares of AT&T (NYSE: T) dropped by around $1 to $33.80 on the announcement, though the overall indices took a similar-sized plunge attributed to the election results.

AT&T said it plans to expand its 4G LTE network to cover 300 million people in the United States by the end of 2014, up from its current plans to deploy 4G LTE to about 250 million people by the end of next year. In AT&T's 22-state wireline service area, the company expects its 4G LTE network will cover 99 percent of all customer locations.

On the wireless front, AT&T said it had done more than 40 acquisition deals this year (some pending regulatory review) and has plans to buy more. Much of the additional spectrum came from FCC approval to use wireless comms spectrum for mobile broadband. All told, AT&T said it expects to have 118 MHz of spectrum covering the country, and would “continue to advocate with the FCC for release of additional spectrum for the industry's long-term needs.”

As part of Project VIP, AT&T said it expects to deploy small cell technology, macro cells and additional distributed antenna systems to increase the density of its wireless network, which is expected to further improve network quality and increase spectrum efficiency.

With regard to its wireline infrastructure, AT&T said it plans to expand and enhance its IP network to 57 million customer locations (consumer and small business) or 75 percent of all customer locations in its wireline service area by year-end 2015. This expansion will comprise 8.5 million additional households in the U-verse TV footprint for a total of 33 million by the end of 2015. It will also include deploying U-verse broadband and VoIP service to 24 million customer locations by the end of 2013.

The Project VIP plan includes an upgrade for U-verse to speeds of up to 75 Mbps and for U-verse broadband to speeds of up to 45 Mbps, with a path to deliver even higher speeds in the future.

In the 25 percent of AT&T's wireline customer locations where it's currently not economically feasible to build a competitive IP wireline network, the company said it will utilize its expanding 4G LTE wireless network as it becomes available to offer voice and high-speed IP Internet services. The company said its 4G LTE network will cover 99 percent of all in-region customer locations.

AT&T’s plan also incudes expanding its fiber network to cover an additional 1 million business customer locations, or half the multi-tenant business buildings in its wireline footprint.

Alongside network expansion, AT&T will push its services such as Digital Life automated home security and Mobile Wallet, an ISIS joint venture now in trials in Austin, Texas and Salt Lake City. Another project involves in-vehicle broadband services in conjunction with Ford, Nissan and BMW.

AT&T expects to invest $8 billion in wireless initiatives and $6 billion on the wireline side. Total capital spending expected to be approximately $22 billion for each of next three years. The full-grown Baby Bell said it had shaved around $9 billion in debt over the least three years and refinanced another $20 billion in debt at lower interest rates, reducing the cost of debt by 60 basis points. It additionally is seeking federal approval to contribute a preferred equity interest in the wireless business worth $9.5 billion to the company’s pension trust.

AT&T said it expects to increase its capital intensity to the high end of the mid-teens as a percentage of revenues in the next two years, returning to normal levels in 2015. AT&T expects capital spending to be approximately $22 billion for each of the next three years, then return to pre-Project VIP levels.

Federal Communications Chairman Julius Genachowski said AT&T's announcement was “proof positive that the climate for investment and innvoation in the U.S. communications sector is healthy. Today's announcement adds nearly $200 billion of investment in wireless and wireline broadband networks since 2009.”

D.C. consumer interest lobby Public Knowledge said, “AT&T would not have made this investment if it had solved its problems through consolidation by buying T-Mobile. To get the merger through, AT&T promised to invest $8 billion in the combined network, and leaked documents during the merger review suggested the actual investment would have been closer to $3 billion. By blocking the merger, the Department of Justice and the FCC have increased AT&T's investment in its network. ”

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