(T) AT&T to Offer Zynga Games

AT&T Inc. (T) a leading wireless carrier in the U.S. has collaborated with Zynga, a popular Web-based social gaming company to offer mobile social gaming options on its Google’s (GOOG) Android-based smartphones and tablets.

The company plans to provide Web-based games such as Words with Friends and Zynga Poker. The games can be downloaded from its shelf in the Android Market application and will be available by the end of this year.

In another recent development, the company had made a strong move in the enterprise market with cloud-based Content Delivery Network (CDN) platform and Managed Telepresence Services. AT&T has now added another feather in its cap by being the first wireless carrier to join hands with a social gaming company to add more value to subscribers’ wireless experience.

Currently, it is estimated that approximately 20% of the U.S. population are playing games in social networking sites, representing a market capitalization of approximately $2 billion. With AT&T’s latest mobile social games offering, it seeks to tap potential opportunities in the rapidly growing social networking games market and gain a competitive advantage over telecom giants like Sprint Nextel (S) and Verizon Communications Inc. (VZ).

On the other hand, Zynga continues to dominate the social gaming market with popular games like CityVille, played by approximately 90 million users and Farmville, played by approximately 43 million.

There are also rumors in the market that Zynga has launched its IPO, which is estimated to garner market capitalization of approximately $10 billion to $20 billion. We believe Zynga’s IPO is attributable to its growing presence in the virtual goods market (approximately 50% of which is controlled by social gaming).

We believe both AT&T and Zynga remain benefited by the deal. Customers should also be happy to access Zynga games on their smartphones backed by AT&T’s most advanced wireless network that enables faster and better gaming experience.

Currently, we maintain our long-term Neutral recommendation on AT&T, supported by a Zacks #3 Rank (Hold).

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