AT&T Pushes LTE Aggressively Through Lumia

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AT&T (NYSE:T) will launch the first LTE-enabled Windows Phone, the Nokia (NYSE:NOK) Lumia 900, for $99.99 on April 8. At this price point, not only is the high-end smartphone half as expensive as the latest iPhone 4S but is also slightly less expensive than the two-year old iPhone 4. Over the weekend, the carrier even ran a promotional rebate scheme of $100 to pre-order the Lumia, effectively making it available for free with a  two-year contract. [1] AT&T has even claimed that the LTE-enabled Lumia will be its biggest product launch ever, surpassing even the iPhone. [2] With Verizon getting aggressive with its LTE plans, it does seem that the second largest carrier in the U.S. does not want to be left behind.

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AT&T’s burgeoning capital expenses…

Verizon has already made its aggressive LTE intentions clear by announcing that it plans to introduce only those phones this year that support its high-speed network. Moreover, it has also increased its year-end LTE coverage target to 260 million Americans from the 250 million target earlier. Currently, it is well ahead of AT&T, whose LTE network covers roughly 75 million Americans compared to Verizon’s 200 million. AT&T plans to double that coverage to 150 million by the year end, but even then it will fall well short of Verizon’s projected coverage target.

In order to catch up, AT&T has been investing heavily in its LTE infrastructure, rapidly rolling out in new markets to make up for its relatively late entry into the space. Over the past two years, AT&T has invested heavily in its HSPA+ and LTE networks, and we don’t see that reducing anytime soon.

…to be offset by rise in data ARPUs

With AT&T’s LTE coverage expected to lag Verizon’s well into the next year, the former is looking to make up for less coverage with the launch of popular smartphones and marketing them well. With the launch of Lumia and a strong line-up of LTE-capable smartphones soon after should ensure that the carrier can at least partially recover these costs through increased adoption of its LTE phones.

Higher LTE speeds will see subscribers increasingly use data-intensive applications on their smartphones. This will drive data revenues, thereby increasing ARPU levels for AT&T over the coming years. Meanwhile, limited LTE coverage will be a deterrent for many but a fallback option in the form of the carrier’s HSPA+ network, which provides higher speeds than 3G and has a wider coverage area than its LTE network, should offer an interim solution.

Even the Chinese telecom carriers have jumped on Nokia’s Lumia line of smartphones, with the first Lumia released in China on China Telecom’s network on March 28. While this Lumia model is not 4G-capable, carriers in China are looking to transition their huge 2G base to 3G.

Additionally, with Andoid-based smartphones and the iPhone making up the lion’s share of the smartphone market, carriers globally are hoping for the emergence of a competitive third alternative mobile ecosystem in Windows Phone to counter Apple and Google’s growing dominance. (see Nokia Faces Big Tests This Year In China And U.S.)

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Notes:
  1. AT&T Offers Nokia Lumia 900 LTE Smartphone for Free on Contract, DailyTech, March 30th, 2012 []
  2. AT&T promises biggest launch ever for Lumia 900, CNET, March 28th, 2012 []
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