AT&T Looks to Expand its Relationship with China Telecom

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AT&T (NYSE:T) recently signed a deal with China Telecom (NYSE:CHA) to expand their existing relationship by connecting their network infrastructure in the U.S. and China. By expanding the services, these companies can better serve multinational companies that use their services in both regions. [1] China Telecom is China’s largest land-line operator and also its third-largest wireless provider behind China Mobile (NYSE:CHL) and China Unicom (NYSE:CHU).

Our $38 price estimate for AT&T stock is about 30% above market price.

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Deal allows AT&T to expand its operations in China

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Although AT&T already offers its clients services in China, the new deal will deepen ties between the two companies and will enable clients of both companies to more efficiently and more cheaply coordinate their operations in different markets. These include services such as hosting, cloud-computing and network integration. Through this deal AT&T would be able to expand its operations in world’s biggest telecom market in the name of China.

China Telecom also looking to expand in the U.S.

Incidentally, a few weeks back, China Telecom announced plans to expand its operations into the U.S. with the sale of wireless services under its own brand. China Telecom plans to offer services as a mobile virtual network operator (MVNO) and will target Chinese expats and students as well as frequent travelers between China and the U.S. (see China Telecom to Enter U.S. Wireless Market in 2012). We think this is an interesting move that highlights the global reach telecom companies now have.

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Notes:
  1. AT&T and China Telecom Sign Agreement to Expand Relationship, Deliver Global Solutions to Multinational Companies, AT&T press release, November 30th, 2011 []