AT&T needs to spend $5 billion to catch Verizon
An industry financial analyst has calculated that AT&T would need to spend approximately $5 billion to bring its network up to a level where it could effectively compete with that of rival Verizon.
Gerard Hallaren, director of research at TownHall Investment Research, says that the public’s perception of AT&T has more than a little basis in fact, and that the effort needed to catch up to its chief rivals could cost AT&T up to $5 billion. Hallaren said during a conference call with AT&T investors that AT&T has been primarily carried by its exclusive iPhone deal but has not been investing in its wireless infrastructure at a sufficient level during the period of that contract, according to a PC World story.
This has led to network shortfalls and customer problems. If AT&T loses its exclusive deal with Apple, as is expected, this could lead to significant revenue reductions. Hallaren and his company accordingly reduced its investment opinion of AT&T from “Favorable” to “Neutral.” Hallaren feels that the choices available to AT&T are stark: “It has a choice to spend or suffer.”
Spending on its network is something that AT&T has not been doing over the last several years, according to statistics presented during the conference call. Especially in the critical category of network improvement expenditures per subscriber, AT&T is a dismal third out of three: Verizon has spent $353, Sprint $310, and AT&T just $308, all during the period 2006 to 2009. Unfortunately, their wireless service shows their lack of spending.
In customer surveys, the iPhone has been repeatedly been rated the favorite of smartphone customers, while AT&T has the worst rating among wireless subscribers. It is easy to see that AT&T’s problems are probably holding sales of the iPhone down. It would be very interesting to see where the iPhone sales numbers would be if they had signed a deal with Verizon rather than AT&T. It is likely that we will be able to find out what difference it would have made later this year, when AT&T’s exclusive deal with the Apple is likely to end.
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