Voice

AT&T to Expand U-verse to 33 Million Homes

Rollout Part of Telco’s $14 Billion Additional Capex Over Next Three Years 11/07/2012 8:22 AM Eastern
As part of a three-year, $14 billion capital investment plan, AT&T said it will widen its fiber-based U-verse network by more than one-third -- or about 8.5 million additional customer locations, for a total potential of 33 million homes -- by the end of 2015, while boosting downstream Internet speeds to up to 75 Mbps.
The telco outlined the plan, dubbed Project Velocity IP (VIP), Wednesday at its annual investor day in New York. Project VIP includes efforts to expand and enhance both its wireless and wireline IP broadband networks.
As expansive as it is, AT&T still isn’t planning to roll out fiber-to-the-home in any broad way, as Verizon Communications has.
AT&T expects capital spending to be approximately $22 billion for each of the next three years, then return to pre-Project VIP levels. The telco said it will increase capital spending to the “high end of the mid-teens” as a percentage of revenue in the next two years, returning to previous levels in 2015. The company last month said it anticipates capex for 2012 to come in at "the low end" of the $19 billion to $20 billion range.
AT&T stock was down 2.4% as of 1 p.m., to $33.96 per share, amid a broader post-election market slump.
“This is a major commitment to invest in 21st Century communications infrastructure for the United States and bring high-speed Internet connectivity -- 4G LTE mobile and wireline IP broadband -- to millions more Americans,” AT&T CEO Randall Stephenson said in a statement. “We have the opportunity to improve AT&T's revenue growth and cost structure for years to come, and create substantial value for shareowners.”
Unlike Verizon's FiOS, the AT&T U-verse network typically delivers data and video via fiber-to-the-node connections with copper-based DSL to customer premises.
In addition to the U-verse expansion, AT&T plans to offer U-verse IPDSLAM service (high-speed IP Internet access and voice-over-IP) to 24 million customer locations in its wireline service area by year-end 2013. The IPDSLAMs will offer Internet speeds of up to 45 Mbps, with a path to deliver even higher speeds in the future, according to AT&T.
For the remaining 25% of AT&T's wireline footprint where it is “currently not economically feasible to build a competitive IP wireline network,” according to the company -- representing about 19 million customer locations -- AT&T will use its expanding 4G LTE wireless network to offer voice and high-speed IP Internet services.
For commercial customers, AT&T plans to expand its fiber-to-the-premises network to reach an additional 1 million business customer locations, or 50% of the multitenant business buildings in its wireline footprint.
On the wireless front, Project VIP will include 4G LTE network expansion to cover 300 million people in the U.S. by year-end 2014, up from its current plans to deploy LTE to about 250 million people by year-end 2013. In AT&T's 22-state wireline service area, the company expects its 4G LTE network will cover 99% of all customer locations.
AT&T also said it plans to acquire additional wireless spectrum for the 4G LTE buildout. AT&T has acquired spectrum through more than 40 deals in 2012 (some pending regulatory review). Between what the company already owns and transactions pending regulatory approval, AT&T expects to have about 118 MHz of spectrum nationwide. The telco said it will continue to “advocate with the FCC” for release of additional spectrum for the industry's long-term needs.
On the day after President Obama was re-elected for a second term, Washington policymakers responded positively to AT&T's investment commitment.
Federal Communications Commission chairman Julius Genachowski said AT&T's announcement "is proof positive that the climate for investment and innovation in the U.S. communications sector is healthy." NTIA chief Larry Strickling, meanwhile, said the telco's plans were "promising."
Other new growth initiatives under Project VIP include: AT&T Digital Life, the telco’s nationwide IP-based home security and automation service to launch in 2013; a nationwide mobile service alternative for wireline voice service that in the future will include high-speed IP Internet data services; and Mobile Wallet, with AT&T participating in the ISIS mobile wallet joint venture with market trials under way in Austin, Texas, and Salt Lake City.
Over the next three years, AT&T said, earnings per share will grow in the “mid-single-digit or better range.” Consolidated revenue will grow 100 basis points faster than gross domestic product, the telco said.
The telco expects growth areas -- wireless, wireline data and managed IT services -- will comprise 90% of total revenue by 2016, up from about 80% today.
In making its case to investors for the Project VIP initiative, AT&T noted that it has reduced its debt by approximately $9 billion over the last three years and refinanced $20 billion in debt (reducing its cost of debt by 60 basis points). AT&T also recently filed a proposal with the U.S. Department of Labor to contribute a preferred equity interest in its wireless business, valued at $9.5 billion, to the company's pension trust, which the telco said will “substantially improve the funded status of the plan.”
AT&T said it expects to tap debt markets to “take advantage of historically low interest rates,” with a long-term goal of maintaining its credit rating in the “A” range or higher.
Over the next two years, AT&T expects its net-debt-to-EBITDA ratio to move from 1.42 at the end of the third quarter of 2012 up to the 1.8 range to align with “lower interest costs and debt capacity.” The company said it expects this ratio to decline in 2015.
-- John Eggerton contributed to this article.
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