The past week was an exciting one for the telecom sector. AT&T (NYSE:T) announced the addition of addition of four more markets to its LTE coverage list, taking its LTE population coverage to 160 million. Verizon (NYSE:VZ) and Redbox owner, Coinstar, announced plans to launch an invitation-only beta version of their video streaming and rental service, called Redbox Instant, next week. With its financial position bolstered by the deal with Softbank, rumors sprung about Sprint (NYSE:S) looking to acquire the rest of Clearwire, so as to be able to use its vast spectrum resource to increase its LTE coverage and improve service quality.
With Verizon racing away with its LTE expansion plans, AT&T is aggressively ramping up its own LTE roll-out. Only a month after meeting its targeted year-end LTE coverage of 150 million Americans ahead of schedule, the second largest U.S. wireless carrier announced this week the addition of four more markets to its LTE coverage list, boosting its population coverage to 160 million. While this still leaves AT&T some way behind Verizon, which has already exceeded its year-end target of covering 250 million Americans with LTE, the carrier has come a long way since the start of the year when it had less than half the current LTE coverage. AT&T plans to reach 250 million Americans with its LTE network by the end of 2013; so widespread high-speed coverage shouldn’t be a concern for long.
- Why Is AT&T Interested In Yahoo’s Internet Assets?
- How Is AT&T’s Business Solutions Revenue Expected To Trend?
- Can AT&T’s Wireless Margins Continue To Expand?
- How Is AT&T’s International Business Expected To Trend?
- How Much Can AT&T’s Revenues Grow Over The Next 5 Years?
- How Is AT&T’s Revenue Mix Expected To Change Over The Next 5 Years?
With 2013 expected to be a big year for high-speed LTE, AT&T has also drawn up an elaborate plan that will see it spend as much as $14 billion on network upgrades over the next few years to not only improve network quality and spectrum efficiency but also expand its 4G LTE network to new markets. The huge investment plan is a bet on the growing customer demand for mobile data which requires the building of high-speed efficient networks. In addition to spending on infrastructure upgrades, AT&T is bolstering its spectrum position with a host of spectrum deals that will help it expand 4G LTE coverage and increase network capacity. (see AT&T Continues Acquisition Spree To Meet LTE Spectrum Needs) As LTE adoption grows and the technology gradually becomes a network standard, AT&T will need to catch up with Verizon’s far wider LTE network in both coverage and quality in order to avoid losing market share in an increasingly saturated wireless market. (see AT&T Speeds Up LTE Rollout With An Eye On Mobile Data Growth)
Verizon and Redbox seem likely to make good on their plans to launch their joint online video streaming service by Christmas this year. Christened Redbox Instant, the online service will offer an unlimited video streaming plan along with four nights of DVD rentals for a monthly charge of $8-$9. In addition to the combined service, the companies plan to provide subscribers a standalone unlimited streaming service for $6. Both these services will be available to select customers initially as only the beta version of Redbox Instant is launched on an invitation-only basis next week. The joint offering will be fully launched next year and poses a big threat to not only incumbents Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) but also cable operators such as Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC) that are concerned about cord-cutters dropping their pay TV subscriptions in favor of cheaper web-based alternatives.
While Redbox Instant (RI) may launch with a price advantage over rivals, it does have some major shortcomings going into a market that has long-time players such as Netflix. For one, the service is aimed at movie lovers and will therefore not include access to TV shows or game rentals initially. Moreover, when compared to Netflix’s over 60,000 titles, RI will launch with a library of only 5,500 movies. This may however change quickly as Verizon uses its bigger financial clout to win more content deals and promotes this service to its over 95 million retail wireless subscribers. We believe that the long-term goal of this venture is to drive the demand for mobile data on smartphones and tablets as 4G speeds become ubiquitous. (see Verizon Salivates Over Juicy Data Growth With Redbox Streaming Service)
Emboldened by the recent deal with Japanese carrier Softbank, Sprint is looking to make use of its surer financial footing to acquire more spectrum. The third largest wireless carrier in the U.S. is rumored to be in discussions to purchase the remaining 49% of Clearwire’s stake – which it doesn’t already own – and use the huge swathe of spectrum for its own LTE network. Multiple reports including those from the CNBC, the Wall Street Journal and Bloomberg have all commented on the potential for this to happen. The deal, according to the reports, could be finalized by the end of the year and completed by March or April next year when Sprint hopes to get the Softbank deal approved as well.
Purchasing Clearwire does make sense as it will give Sprint access to Clearwire’s vast swathe of 2GHz spectrum. In the top 100 markets in the U.S., Clearwire has around 160 MHz of spectrum on average. Moreover, the two companies already have a deal in place, according to which Sprint will be able to offload 4G LTE traffic onto Clearwire’s planned TD-LTE network. However, a move on Clearwire means that Sprint will also have to absorb the latter’s over $3 billion in net debt and more than $300 million in operating losses every quarter. But considering that the government’s TV spectrum auctions are at least 3 years away and Sprint now has the financial cushion of Softbank to make this aggressive move, Clearwire’s spectrum does seem like a very attractive option. With this resource, Sprint will not only be able to build out a robust LTE network but also compete more effectively with Verizon and AT&T, who are farther ahead in their LTE deployment plans. (see Sprint Could Snag The Rest Of Clearwire To Bolster Its LTE Prospects)