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AT & T: Wireless Is Top Investment Priority

Thu, 01/28/2010 - 7:22am
Monica Alleven

AT&T posted strong wireless results for the fourth quarter – a net gain in total wireless subscribers of 2.7 million and 3.1 million iPhone activations – but what a lot of customers really want to know is what's the operator doing to improve its network?

AT&T answered that today in a conference call with analysts, with John Stankey, president and CEO of AT&T Operations, spending considerable time spelling out what the operator has done and will do to improve service quality.

Data usage has increased 5,000 percent over the past three years. "It's a high-class problem," he said. But to get ahead of the volumes, AT&T made significant investments in 2009, adding 1,900 new cell sites and doubling the number of fiber-served cell sites, he said. AT&T's 2010 overall capital expenditures are expected to be up 5 percent to 10 percent from 2009, driven largely by the wireless side. "Wireless is our No. 1 investment priority," he said.

Top priorities include a $2 billion increase in wireless and backhaul spending this year and a focus on HSPA 7.2, groundwork for LTE, overall capacity and performance and an "intense program" for high-volume metro areas.

AT&T is particularly focused on New York City and San Francisco, two very high-usage areas with high customer expectations. In Manhattan, the carrier is focused on putting more radio capacity on the street, Stankey said. In San Francisco, the company is through the majority of zoning challenges and is adding cell towers and high-capacity antennas.

In the next 90 days, the carrier intends to deploy Ethernet to the cell site to improve backhaul, with other projects under way to improve service in both markets over the coming months.

Stankey also touted the benefits of using 850 MHz, which is "very effective" in penetrating buildings, and the advantages over CDMA of going from a UMTS-based network to LTE, including in the areas of handset design and the ability to interoperate on a global basis. Its nationwide HSPA 7.2 deployment is a "very big deal" for the industry and the carrier has turned up 7.2 in 3G cell sites nationwide, improving network efficiency. The natural progression to LTE from 7.2 will be a major differentiator for AT&T in the marketplace, he said, and early field results are encouraging.

As for the iPad, executives said they believe the AT&T network is a natural fit for the 3G version of the device, which operates on both 7.2 and Wi-Fi. AT&T's forecast for usage of the device falls somewhere between its highest usage integrated devices, like an iPhone, and a laptop type of environment. Given where the device is most likely to be used – in homes, offices, coffee shops and airports – the expectation is a substantial amount of usage time will be in the Wi-Fi environment.

In other numbers out today, AT&T's wireless service revenues grew 9.2 percent. Overall wireless churn was 1.44 percent in the quarter, with postpaid churn of 1.19 percent. Full-year net adds totaled 7.3 million, ending with 85.1 million subscribers in service.

Wireless data revenues increased 26.3 percent from the year-earlier quarter. Postpaid ARPU increased 2.6 percent compared with the year-earlier quarter to $61.13. Postpaid data ARPU reached $19.16, up 17.5 percent versus the year-earlier quarter.

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