Tuesday, December 8, 2009

AT&T Pursues Higher Wireless Margins in Mid-40% Range

AT&T sees its significant opportunities ahead in consumer wireless service and U-verse TV service, said Ralph de la Vega, President and CEO of AT&T Mobility, speaking at the UBS Global Media and Communications Conference in New York.

Despite the weak economic conditions, de la Vega said AT&T did a good job this year in adding wireless subscribers, growing the U-verse franchise and upgrading both its wireless and wireline network. He believes the U.S. now leads the world market in smartphones and 3G -- trends that he expects will expand rapidly in 2010. The network augmentation that AT&T has put in place for the current HSPA 7.2 upgrade program puts the company in good place for rolling LTE out later.

The company is not planning any significant uptick in its CAPEX budget. AT&T is still negotiating on the LTE upgrade process with its vendor.

Some notes from the presentation

  • The growth in wireless data in concentrated markets like Manhattan and downtown San Francisco has been unprecedented. Growth has spike due to iPhone usage. Activating the 850MHz network also led to a sudden traffic spike due to building penetration, as indoor iPhone users suddenly could access the network. The company is upgrading its backhaul and replacing older microcells that have not scaled well for 3G.

  • Three percent of smartphone customers are driving about 40% of mobile data traffic. The company is considering steps to make those heavy users reconsider or reduce their usage so they don't crowd out others in the same cell site. One problem is that customers are not aware of their data traffic patterns. Longer term, de la Vega there is likely to be a pricing structure to address data usage, but such a change would depend on competitive pressures and regulatory requirements.

  • AT&T will launch HSPA 7.2 in six markets by the end of this month

  • AT&T plans to have HSPA 7.2 running in 25 of its top 30 markets by Q2 2010

  • More than a dozen HSPA 7.2 devices are available now, including the iPhone 3GS

  • AT&T sees big opportunity for Emerging Devices, such as eReaders, personal navigation devices and NetBooks.

  • Wireless business now represents an annual revenue stream of more than $50 billion

  • AT&T just crossed the 2 million subscriber milestone for U-verse

  • U-verse now passes 20 million homes and the company plans to pass 30 million by the end of next year

  • U-verse operational metrics continue to improve and the company said it is seeing speeds in excess of what it had predicted

  • AT&T is launching 24 Mbps Internet access in an initial 3 markets

  • The company continues to pursue a "One AT&T" convergence solution with application portability across 3 screens

An archive of the webcast is on the company's website.