New Markets for AT&T 4G

AT&T Inc. (T - Analyst Report) plans to introduce Long Term Evolution (LTE) based 4G networks in several markets by this summer. The LTE offers mobile broadband speeds up to 10 times faster than 3G.

The targeted markets are Cleveland, Canton and Akron in Ohio; Staten Island in New York; New Orleans and Baton Rouge in Louisiana; St. Louis in Missouri; Naples in Florida; Bloomington, Lafayette and Muncie in Indiana; and Bryan-College Station in Texas.

Currently, AT&T’s LTE service is available in 28 markets. The addition of 12 markets will take the number to 40. AT&T is the only U.S. carrier that provides 4G network through both LTE and High-Speed Packet Access Plus (HSPA+) technologies.

Late last summer, the second-largest U.S. mobile service provider initially rolled out 4G LTE networks, which went on to become the benchmark of mobile technology and the life-blood for operators across the world. By the end of 2011, AT&T’s LTE coverage reached 74 million Americans. The company expects this coverage to double by the end of 2012 and deployment to reach to 80% of the U.S. population by 2013.

AT&T is the way behind its major rivals Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ - Analyst Report) and Vodafone Group plc (VOD - Analyst Report), and Sprint Nextel Corp. (S - Analyst Report) in deploying LTE networks. Verizon deployed 4G LTE services in 195 markets as of January 23, covering more than 200 million people andexpects to expand its 4G network to its entire nationwide 3G footprint by mid-2013.

Sprint, the third-largest wireless operator, was the first to launch 4G services in 2010 through WiMax (a wireless broadband technology) network in collaboration with Clearwire Corp. (CLWR - Snapshot Report). Now, the company plans to launch its own LTE networks in mid-2012 and expects to complete the deployment by year-end 2013. Initially, LTE services will be deployed in six markets including Atlanta, Baltimore, Dallas, Houston, Kansas City and San Antonio.

The LTE deployments will allow the global carriers to take advantage of the new and unused spectrums, and simultaneously expand their abilities to deliver the strongest and the most advanced networks. In addition, enhancing network capabilities will lead to the creation of new job opportunities, economies of scale and open up markets that were previously inaccessible.

Nevertheless, LTE poses a major risk to AT&T’s wireless segment as the other wireless service providers may delay their deployment of LTE or change their selection and adopt different next-generation technologies, including those that are incompatible with AT&T.

We prefer to maintain our long-term Neutral recommendation on AT&T. The company retains the Zacks # 3 (Hold) Rank for the short term (1–3 months).