Ace wireless provider AT&T Inc. (T) has inked a multi-year agreement with The Walt Disney Company (DIS) for the distribution of Disney’s content services to AT&T’s U-verse Television customers. U-Verse subscribers will now be able to watch Disney sports, entertainment and news through their TV sets, smartphones, computers and tablets. With this, AT&T aims to promote its bundled services and attract customers by providing value added services on a single platform.
AT&T enjoys strong momentum in both wireline and wireless businesses. While continued strength in smartphones is fueling growth in wireless, wireline is benefiting from growth in its U-verse and strategic services. AT&T is the leader in WiFi (wireless broadband) connectivity with over 30,000 domestic and 190,000 international hotspots. We believe the addition of Disney content will fuel growth in U-verse services, resulting in higher data revenues in the wireline segment.
Further, these services are backed by AT&T’s network which enjoys the best Internet speeds across the industry as it is the only U.S. carrier that provides 4G networks through both Long Term Evolution (LTE) and High-Speed Packet Access Plus (HSPA+) technologies.
AT&T initially rolled out LTE networks late last summer that went on to become the benchmark of mobile technology and the life-blood for operators across the world. The company’s 4G LTE service is currently available in 103 markets with more than 150 million users in the U.S. It aims to reach about 250 million people by 2013-end and 300 million by year-end 2014.
We remain optimistic about AT&T’s growth prospects given its subscriber accretion, higher smartphones adoption, LTE mobile broadband network, iPhone sales and U-verse expansion. These would in turn lead to improved revenue growth.
The company’s foray into cloud computing and hotel WiFi businesses is expected to result in better profitability. Other positive attributes for the company include a strategic realignment initiative and healthy financial profile. However, persistent access line losses, competitive pressures from peers like Verizon Communications (VZ) and regulatory issues will likely weigh on the stock in the coming days.
AT&T retains a Zacks Rank #3 (Hold). For the long term, we have a Neutral recommendation on the stock.
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