So when AT&T Inc. (NYSE:T) turned on its 4G LTE network in Laramie, I was not surprised. But I wondered whether the company can sustain the innovation and investment involved with the 4G LTE roll-out. Below, I will explain why AT&T Inc. (NYSE:T)’s Project VIP, combined with its aggressive investment – along with reported growth in its wireless division – will allow the company to thrive in this growing market.
Project VIP
Over the past few quarters, AT&T has formulated Project VIP to improve its competitive position in the 4G LTE market. The company is expanding its high-growth platforms to millions more customers. To fund the project, AT&T Inc. (NYSE:T) has had to take some debt – bringing its total amount to $74.92 billion. Though AT&T’s debt is supposed to slow its ability to expand the 4G LTE roll-out, the company’s increased revenue has enabled it to continue with the project.
Aggressive Investment
Aggressive investment has helped AT&T Inc. (NYSE:T) to set up the nation’s largest 4G LTE network. For instance, it invested over $30 million in its Wyoming wireless and wireline networks by 2012, with a focus on increasing 4G LTE coverage. While investment may consume money in the short term, if the company generates revenue quickly, it won’t have trouble keeping up with the demand for its services. But AT&T may have to hire more people to match its work force.
This could provide for a way to coax good workers from the competition, as there is not much difference in services offered by telecom companies in the 4G LTE market. This will mean better quality customer service, fast repairs, and better management of equipment. AT&T Inc. (NYSE:T) will take its time to maintain balance between aggressive investment and expansion.
Wireless Service Growth
During the first quarter earnings report, AT&T reported that wireless data revenues went up 21% versus the year ago quarter. Wireless operating income was up 28%. Total wireless and wireless services revenue went up 3.4% versus the year ago quarter. Compared to peers Verizon Communications Inc. (NYSE:VZ), which reported 8.5% growth year-over-year, and Sprint Nextel Corporation (NYSE:S),which reported a 15% growth year-over-year, AT&T Inc. (NYSE:T) is right on par to remain competitive.
Despite expanding its 4G LTE network to areas such as Corsicana, Athens, and Huntville recently, AT&T plans to deliver the best possible mobile internet experience. Its 4G LTE network covers 287 million people. In comparison, Verizon Communications Inc. (NYSE:VZ) has provided 273 million people with 4G LTE networks. Sprint Nextel Corporation (NYSE:S) has covered about 200 million people. AT&T Inc. (NYSE:T) has also invested in mobile data, U-verse, strategic business services.
Top Players
Investors should pay close attention to the 4G LTE market as demand for its services continues to grow at a fast rate. AT&T, Verizon, and Sprint all provide 4G LTE services along with other business solutions.
AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) have strengths that Sprint Nextel Corporation (NYSE:S) lacks. AT&T has $7.07 billion in free cash flow – Verizon, $3.51 billion in free cash flow. Free cash enables businesses and organization to invest heavily toward expanding operations and having a low debt profile. This, along with a solid foundation for future growth, means that Sprint Nextel Corporation (NYSE:S) ($319.12 million in free cash flow) will find it difficult to compete with the two.
But investors should not underestimate Sprint Nextel Corporation (NYSE:S)’s ability, as it has the manpower and technology to rival AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ). Sprint recently rolled out 4G LTE networks in 21 more markets. Verizon also expanded the 4G LTE network to cities such as Cayuga County, Chautauqua County, and others.
Summary
Relying on embedding LTE technology in mobile and other consumer devices, Verizon Communications Inc. (NYSE:VZ), in similar fashion to AT&T, has increased its 4G LTE revenues without having to restructure the company. Combined with smart business strategy, Sprint Nextel Corporation (NYSE:S) will remain a threat as it closes in on AT&T Inc. (NYSE:T) and Verizon.
The article A Bullish Case for AT&T originally appeared on Fool.com.
Adetokunbo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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