How Are AT&T’s International Operations Expected To Trend?

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AT&T (NYSE:T) doubled down on its international operations in 2015 with the acquisition of DirecTV – which gave it access to the Latin American Pay TV market – and also through its purchase of  Mexican wireless carriers Iusacell and NEXTEL Mexico. Below we take a look at how the company’s international operations could trend over the next 5 years.

T_International_2020_1

Latin America Pay TV Operations

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A challenging economy in Brazil could put pressure on the subscriber growth of DirecTV’s Latin American operations in the near term. However, we expect the metric to grow over the longer term, driven by the company’s technology advantages. While the pay TV operations should see per-subscriber revenue growth on a local currency basis, owing to value added services such as HD-DVR and higher content costs, this could be offset in dollar terms, on account of significant depreciation of currencies such as the Argentinean Peso and the Brazilian Real versus the U.S. dollar.

Mexico Wireless

AT&T’s Mexican wireless operations are seeing solid growth, as the carrier focuses on expanding coverage while re-branding its Mexican retail outlets and services with the AT&T brand. The carrier expects its LTE coverage in Mexico to improve from 51 million POPs currently to about 100 million POPs by 2018. The Mexican government is also encouraging greater competition in its telecom sector, while reducing the dominance of America Movil, proving advantageous for smaller carriers such as AT&T. We expect AT&T’s Mexican wireless subscriber base to grow from about 8.7 million subscribers in 2015 to about 10.5 million subscribers in 2020. ARPU should also trend higher, driven by better LTE coverage and data consumption growth.

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