AT&T Investments Boost Local Network - Analyst Blog

Capital investments are an integral part of network development in the wireless space. Based on this strategy, leading national carrier, AT&T Inc. T, in a series of press releases, showcased its investment capabilities in regions like Wisconsin, Milwaukee and Indianapolis. The company has invested $800 million in  Wisconsin between 2011 and 2013.

During the same period, AT&T invested $275 million and $375 million in Milwaukee and Indianapolis, respectively. We believe that continued growth through network development will help strengthen the market position in these local regions and also beef up the customer base through superior service quality.

We believe the company's investment policy stems from a solid balance sheet position. With $7.9 billion of cash from operations and free cash flow of $2.5 billion in the fourth quarter, AT&T possesses one of the strongest balance sheets in the industry. Despite capital expenditure projection of $21 billion, the company expects strong free cash flow in 2014, which signifies strong business growth ahead.

The company is already running ahead of schedule in 4G LTE service deployment and expects to cover 300 million users by mid 2014. In addition, smartphone sales were solid at $7.9 million in the quarter, resulting in higher data usage. As of Dec 31, 2013, smartphone comprised 93% of all post-paid sales.

One of the key investment areas for the company upon which its future growth hinges is project VIP initiative. These include expanding 4G LTE, enhancing spectrum and network capabilities, expanding U-verse services to 8.5 million new customer locations and expansion of broadband services to 57 million users, covering 75% of the company's wireline footprint by the end of 2015. In addition, the company is also seeking to expand its fiber network to 1 million additional customer locations by 2015.

This project underlines the company's efforts to meet the growing demand for high-speed Internet. We believe that this investment program will provide AT&T with a high-potential growth platform for revenues and earnings.

AT&T currently retains a Zacks Rank #3 (Hold).

Other Stocks

Better-ranked stocks in this sector include Shenandoah Telecommunications Co. SHEN, Telecom Italia S.p.A. TI and Level 3 Communications, Inc. LVLT. While Shenandoah and Telecom Italia boast a Zacks Rank #1 (Buy), Level 3 Communications carries a Zacks Rank #2 (Buy).