AT&T Needs to Spend $5 Billion to Catch Up to Verizon

AT&T needs to spend about $5 billion on its wireless network to catch up to the coverage offered by Verizon Wireless, according to TownHall Investment Research.

During a conference call TownHall announced it has reduced the company's rating of from "Favorable" to "Neutral." Gerard Hallaren, director of research at TownHall said the public's perception of AT&T's network is poor and declining, apparently due to real shortcomings when compared with Verizon and Sprint.

"It has a choice to spend or suffer," Hallaren said.


PCWorld notes that according to TownHall, "AT&T's capital expenditures on its wireless network from 2006 through September 2009 totaled about $21.6 billion, compared with $25.4 billion for Verizon and $16 billion for Sprint (including Sprint's investments in WiMax operator Clearwire). Over that time, Verizon has spent far more per subscriber: $353, compared with $308 for AT&T, Hallaren said. Even Sprint has outspent AT&T per subscriber, laying out $310 for network capital expenditure."

Hallaren believes part of the problem is that AT&T spends more on its wired network than its wireless one. AT&T gets 57% of its income from wireless and 35% from wired services. It spends 34% of capital expenditures on wireless and 65% on wired.

Going forward it will be important for AT&T to improve its public perception and make the necessary investments in the right areas. Hallaren notes some positive steps such as moving the 3G service to the longer range 850MHz radio band in San Francisco. This strategy has improved coverage there and will probably be applied nationwide.

Hallaren also mentions that AT&T is well positioned to roll out LTE (Long-Term Evolution), which will deliver higher speeds more efficiently, and should do it soon.


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