AT&T Enters Wireless Deal with Volvo - Analyst Blog

Following the multi-year agreement with Tesla Motors, Inc. TSLA early this year, AT&T, Inc. T has signed up with yet another automobile manufacturer, Volvo Car Corporation. The deal would incorporate providing wireless connectivity to Volvo cars sold in the U.S. and Canada. The service will be installed in Volvo's 2015 model cars.

We believe the deal will expand AT&T's wireless platform and market share in the auto industry, creating an opportunity to diversify from the saturated mobile wireless market.

Apart from Tesla and Volvo, AT&T is also the service provider for General Motors Company GM. In 2014, another carrier, Verizon Communications Inc. VZ also announced a tie-up with Hyundai Motor Co. for providing wireless connection to U.S. cars and trucks.

Cars with high-speed connectivity are the latest rage in the automobile market. Wireless connectivity with Internet access apparently turns the vehicle into a mobile wireless hub providing faster access to apps and other services. Therefore, wireless providers are consistently seeking this new business avenue to grow beyond their existing market, which involves conventional mobile wireless, broadband and enterprise service solutions. 

Coming back to AT&T, the company is also venturing into mobile payment services through collaborations with companies like Vantiv, Inc. We believe such new business opportunities will uplift AT&T's top-line performance and eventually foster earnings growth. For 2014, AT&T expects revenue growth of 2–3% and adjusted earnings per share is estimated to grow in mid single digits excluding the impact of share buybacks.

The company is expected to report its first quarter earnings on Apr 22, 2014 after the closing bell. The Zacks Consensus Estimate for the first quarter earnings is pegged at 69 cents, representing year-over-year growth of 8.48%.

Currently, AT&T carries a Zacks Rank #2 (Buy).