How AT&T Can Benefit As All 50 States Join Its First Responder Network

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Last week, AT&T (NYSE:T) announced that all 50 U.S. states had decided to opt into FirstNet, a Federal government-backed communications network that will be built and operated by AT&T to provide connectivity for first responders across the country.  The developments could effectively cement AT&T’s lead in a business that could eventually drive stable long-term revenues.

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AT&T was selected by the First Responder Network Authority in March 2017 to build and operate a new network for first responders that addresses the interoperability and cost-related issues of legacy radio systems, while also giving first responders access to a wider range of data services (related: How Much Does AT&T Stand To Gain From FirstNet?). The company began sending its plans to various states to review starting from June 2017, giving states the option to opt in or out of the new network. While just about 35 states and U.S. territories opted into the network as of early December, all 50 U.S. states eventually decided to join the network as of the end of December. In addition to the states, the company noted that Washington, D.C., Puerto Rico and the U.S. Virgin Islands had also opted for the service.

How AT&T Benefits From FirstNet

As part of the agreement with the U.S government, AT&T will receive 20 megahertz of wireless spectrum as well as payments of $6.5 billion over the next five years as it builds out the FirstNet network. AT&T expects to spend about $40 billion over 25 years to build and maintain the network. While there isn’t enough financial data to gauge the exact impact of this public-private investment on AT&T’s stock, the company will benefit in multiple ways. The major win for the company is likely to be the 700 Mhz band spectrum (which can be used for LTE deployment) that it gains as part of the contract. Although FirstNet’s spectrum is prioritized for first responders, utilization rates are likely to be very low, meaning that it can be used for AT&T’s commercial wireless operations when there are no emergencies underway. Wells Fargo previously estimated that first responders are likely to utilize under 1% of the 20 MHz. Separately, government customers tend to be very sticky, and this could ensure stable long-term cash flows from the business.

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