AT&T: 30 Million U-verse Homes by 2010

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AT&T bolstered its commitment to U-verse TV, as CEO Randall Stephenson told Wall Street analysts Tuesday that the company expects to expand the service to be available to 30 million customer locations by 2010 – more than five times its current reach.

The nation’s biggest telephone company also projected that it would have more than 1 million U-verse TV subscribers by the end of 2008, up from 126,000 at the close of September.

Stephenson, speaking at AT&T’s analyst day presentation in New York, said the 30 million target includes the anticipated build-out in nine Southeastern states formerly served by BellSouth, which AT&T acquired last year. AT&T said it began a controlled launch of U-verse TV in Atlanta on Tuesday, and will expand to other Southeast markets in 2008.

As of Sept. 30, U-verse TV – which delivers TV signals over Internet Protocol networks to customer homes – was available to 5.5 million living units with AT&T marketing services to about 40% of those.

The 2010 target comes after AT&T last month cut estimates on U-verse reach through the end of next year, while raising estimates on how much the buildout will cost.

The telco said in early November that the U-verse network would now pass 17 million homes, down from previous estimates that it would be available to 19 million. In 2007-08, AT&T expects to spend between $4.5 billion and $5 billion on U-Verse through 2008, which was $500 million more than previously expected.

By passing 30 million homes, U-verse TV would have coverage of about 50% of the residential living units and 33% of businesses in 22 states, according to AT&T group president of telecom operations John Stankey.

AT&T executives did not provide an estimate of the overall cost of U-verse buildout expected through 2010. Stankey reiterated that the cost per living unit passed of the network would remain in “the low-$300 range.”

In a presentation Tuesday, chief financial officer Rick Lindner said U-verse deployment costs are expected to reduce 2008 earnings per share by $0.12 to $0.14. He noted in his presentation that “U-verse has potential to be a multibillion-dollar revenue stream” over the next two to three years.

Stankey said AT&T was on pace to ramp weekly installs of U-verse to more than 40,000 per week by the end of 2008, up from around 10,000 per week in the current quarter. According to Stankey, AT&T has cut customer “trouble contact” rates in half in 2007.

New features planned for 2008 include whole-home digital video recording and support for two simultaneous high-definition TV streams (U-verse currently can deliver just one HD signal per households). In the first quarter, U-verse TV will allow customers to view photos and play home media on their TVs, Stankey said.

On the broadband front, AT&T next year plans to launch a 10-megabit-per-second broadband service based on digital subscriber line.

Ray Wilkins, group president of diversified businesses, said U-verse TV ad insertion would begin in 2009. However, AT&T’s YellowPages.com business would represent the large majority of advertising revenue, projected to be more than $1.5 billion in 2010.

Also Tuesday, AT&T said its board of directors approved a 12.7% increase in the company’s quarterly dividend. The telco announced a new share repurchase authorization for 400 million shares, which represent about 7% of its stock. AT&T said it expects to complete the stock repurchase by the end of 2009.

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