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AT&T Expands Mobile Internet

T AAPL VZ

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AT&T Inc. (T - Analyst Report) is expanding its mobile Internet coverage for customers in South Florida. The company is experiencing strong momentum in its wireless business driven by demand for data services. We expect the company’s expansion plans in this space to strengthen its foothold in data services as well as generate incremental revenues. 

The expansion will involve capacity enhancement in cell sites in order to improve mobile data traffic and voice connectivity. The company boasts the best Internet speeds in 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. AT&T’s 4G LTE service is currently available in 103 markets with more than 150 million users in the U.S.

The telecom giant aims to reach about 250 million people by 2013-end and 300 million by the end of 2014. To support its 4G LTE services, the company offers several 4G LTE smartphones and tablets, which include HTC One X, Samsung Smart PC, Nokia Lumia 900, LG Optimus G and ASUS Vivo Tablet. In addition, during the third quarter, AT&T was the highest selling iPhone 5 carrier-partner for Apple (AAPL - Analyst Report).

We expect AT&T to continue this trend as it is aggressively expanding its 4G LTE coverage. Additionally, the company’s new Mobile Share plans, which allow connecting more than one device to its data plan, will further boost sales of the new iPad as it will cost only $10 per month to connect the new mini iPad to its new data sharing plan. However, we believe that persistent access line losses, competitive pressure from peers like Verizon Communications (VZ - Analyst Report) and heavy iPhone subsidies might drag near-term margins and earnings.

AT&T Inc. has a Zacks #3 Rank, implying a short-term (1–3 months) Hold rating on the stock. For the long-term, we have a Neutral recommendation on the stock.

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