Weekly Telecom Notes: AT&T, Sprint and China Telecom

by Trefis Team
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AT&T (NYSE:T) stole the limelight this week with the announcement of seven LTE-capable smartphones and one tablet at the CES 2012. Sprint (NYSE:S) announced that it is undertaking a major restructuring of its sales and marketing unit merging both its consumer and enterprise wings into a single body. Finally, the iPhone 4S could arrive on China Telecom’s (NYSE:CHA) CDMA network soon.


Primary among the horde of mobile devices AT&T showcased at the CES this week are the LTE-capable Windows Phone debutantes, Nokia Lumia 900 and HTC Titan 2. AT&T will be the exclusive carrier for these phones.

AT&T will also be the first to carry Samsung Galaxy Note, which boasts an unusually large 5.3 inch display and a stylus that can be used for handwriting. AT&T sees some customers preferring the Note over some tablets, at least in the near-term.

AT&T has been investing heavily in its LTE infrastructure, rapidly rolling it out in new markets to make up for its relatively late entry into the space. Verizon (NYSE:VZ), the country’s largest wireless carrier, started building out its LTE network in 2010 and had even launched its first LTE devices at CES 2011 before AT&T decided to jump on the bandwagon.

In order to catch up, AT&T will continue to incur heavy capital expenditures for its LTE expansion plans as it looks to increase coverage. However, the unveiling of a huge lineup of LTE-capable smartphones should ensure that the carrier can at least hope to partially recover these costs through the increased adoption of its LTE phones. (see AT&T Makes Big LTE Push at CES 2012)

See our complete analysis of AT&T here


Sprint announced this week that they are looking to merge two verticals under its sales and marketing division in a bid to make its operations more efficient and free up cash for its investments in the iPhone as well as in the Network Vision Project. The announcement comes on the back of a recent notes offering that saw Sprint raise $4 billion from the bond market, at higher interest rates than usual. Sprint already had a highly leveraged balance sheet prior to the offering. Adding on additional debt made its balance sheet even less attractive and limited the company’s operational flexibility, the effects of which are starting to show with the company’s recent restructuring moves.

We believe that the huge investments that the company is making on its network upgrade and the iPhone will reap dividends in the long-run. However, the company will see its cash flows suffer in the near-term. But if the near-term hit to cash flows forces the company to take some tough decisions in order to make the organization leaner and more efficient, it could add more long-term value to the investments it is making. (see Sprint Worth $4.25, Sheds Weight to Get Into Fighting Shape)

See our complete analysis of Sprint here

China Telecom

Chinese regulators approved Apple’s application for a handset that operates on the CDMA2000 network standard, a technology that China Telecom supports, paving the way for the third largest wireless carrier in the country to finally be able to carry the iPhone. [1] This comes close on the heels of the iPhone 4S launch in China on China Unicom and breaks the two-year hold that Unicom has had on the popular smartphone.

The 3G subscriber growth in China has been rapid, with its 3G base tripling over the last year. Even so, only 12% of all mobile subscribers in China use 3G and that gives a huge market segment for China Unicom to target with the iPhone 4S that currently runs only on Unicom’s 3G network. However, we believe the higher subsidy costs associated with the 4S – China Unicom will be offering the iPhone 4S for free with long-term contract – could be detrimental to the company’s margins in the short-term. [2]

See our complete analysis of China Telecom here

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  1. Apple Moves a Step Closer to Offering IPhone to China Telecom Subscribers, Bloomberg citing The China Radio Management Office website as the source, January 10th, 2012 []
  2. China Unicom customers can get Apple’s iPhone 4S free with contract, AppleInsider, January 6th, 2012 []
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