(T) AT&T’s 4G LTE Expansion Plans

AT&T Inc. (T), the second largest provider of wireless services in North America is expected to roll out its Long-Term Evolution (LTE) based Fourth Generation (4G) technology in mid-2011.

For this, the company projected a capital plan of $19 billion for network upgrades across the U.S. which also includes recently announced wireline and wireless networks’ improvement plans in Kentucky to incorporate 4G services. AT&T has already invested approximately $525 million in the state as part of its investment plan.

Including the commonwealth region, AT&T will expand its 4G LTE technology to almost 97% of the U.S. population. This implies that 46.5 million more Americans, mostly in rural and smaller communities will come under its coverage.

The company is expected to enhance its 4G mobile broadband services in a number of ways. These include: improving existing cell sites, adding more new cell sites to improve network coverage, installing fiber-optic Ethernet backhaul connections to most of the cell sites for incorporation of High-Speed Packet Access Plus (HSPA+) technology that will enhance 4G speed, and adding additional capacity to cell sites by including frequency layers called carriers to manage higher traffic.

We believe AT&T’s expansion into the 4G wireless market will provide an edge over its competitors like Verizon Communications (VZ) and U.S. Cellular (USM) as it remains the only telecom provider equipped to deliver 4G services using both HSPA+ and LTE technologies.

The company has already completed the deployment of HSPA+ to virtually 100% of its mobile broadband 3G network that should support 4G deployment when combined with Ethernet or fiber backhaul. Therefore, the company is rapidly expanding Ethernet and fiber backhaul to cell sites across U.S. and expects that nearly two-thirds of its mobile broadband network will be on expanded backhaul before the deployment of 4G technology.

Apart from the wireless market, AT&T is also poised to tap potential market opportunities in the smartphones arena. AT&T will introduce 20 4G devices by the end of 2011 with 12 new devices based on Google’s (GOOG) latest Android platform.

AT&T plans to feature devices that support 4G based on HSPA+ technology and add devices that support 4G based on LTE technology. These devises include a large collection of smartphones, tablets, modems and mobile hotspots.

Further, to enhance smartphone services, the company also plans to introduce unlimited data plan, starting with $50 per month, and provides services like unlimited talk, text and Web on prepaid plans using AT&T’s GoPhone service.

Currently, we maintain our long-term Neutral recommendation on AT&T. The company also holds a short-term Zacks #3 Rank (Hold).

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