AT&T, Inc. (T - Analyst Report) is expanding its no-contract service plan – Aio Wireless – across the U.S., beginning mid September. Customers can avail of this service through the website of Aio or from authorized retail outlets. Customers can also avail of AT&T’s promotional free service in the third month of usage if activated by Sep 29.
Aio Wireless was initially rolled out in Florida, Texas and the Metro-Atlanta area and is currently available to customers in Chicago. Through Aio, AT&T offers three unlimited plans that include talk, text, and data ranging $40–$70 per month, inclusive of all taxes.
We believe AT&T’s strategy of expanding its no-contract plan across the nation will attract customers who seek an affordable and flexible wireless service and and in turn drive revenues. Moreover, the expansion of Aio would also help in countering the rising market penetration by T-Mobile US, Inc. (TMUS - Analyst Report) in the no-contract space after its takeover of prepaid carrier, MetroPCS.
Further, to strengthen its foothold in the low cost wireless market, AT&T also proposed to take over the largest prepaid wireless operator in the U.S. – Leap Wireless International Inc. – for $1.2 billion. Although 29.8% of Leap’s outstanding shareholders have agreed to vote in favor of the acquisition, the deal is yet to be reviewed by the Federal Communications Commission and the Department of Justice. The transaction is expected to be completed within the next six to nine months.
AT&T is experiencing strong momentum in both wireline and wireless businesses. Continued strength in smartphone and branded computing device sales are fueling growth in its wireless business. Wireline is also improving with continued 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 agreement with IBM will enable the company to scale up its business in the wireless segment and enhance service offerings that garner significant market traction. The company also introduced Digital Life package – a home security and automation service. We believe that product diversification will enable AT&T to grow beyond its legacy market and generate higher revenues in the coming years.
AT&T, which operates with another telecommunication behemoth, Verizon Communications Inc. (VZ - Analyst Report) has a Zacks Rank #3 (Hold).