(T) AT&T Enhances Broadband Service

AT&T Inc. (T) announced that it has added new frequency layers to 12 cell sites of the Sarasota-Bradenton wireless network in South Tampa, Florida to enhance mobile broadband service.

Since early 2011, AT&T has been adding capacity to over 20 cell sites including Bradenton, Sarasota, Osprey and North Port. In Tampa, Florida, the company has upgraded about 130 cell sites and activated five new ones.  AT&T has already invested over $80 million in this region from 2008 to 2010.

The 2011 capacity upgrades in Sarasota-Bradenton is a part of the company’s $19 billion investment plan dedicated toward network upgrades for this year.

AT&T is following heavy investment plans to tap opportunities in the wireless data market. The company is aggressively deploying the high frequency 850 MHz band across its markets to boost 3G network performance. AT&T is the only company that delivers 4G services using both High-Speed Packet Access Plus (HSPA+) and Long-Term Evolution (LTE) technologies. Further, the company is rapidly expanding Ethernet and fiber-to-cell sites nationwide and expects that nearly two-thirds of its mobile broadband network will be on expanded backhaul.

Apart from this, the company now aims 4G network expansion much like it peers — Sprint Nextel (S), Verizon Communications (VZ) and MetroPCS (PCS).The company plans to achieve a peak speed of 100 Mbps and cover between 70 million and 75 million people by year-end 2011. Post T-Mobile merger, AT&T expects its 4G LTE technology to reach almost 97% of the U.S. population. Further, the company plans to invest in spectrum licenses to enhance its 4G technology mobile broadband services. With respect to this, the company has agreed to acquire mobile television spectrum licenses in the lower 700 MHz frequency band from Qualcomm Inc. (QCOM) for $1.93 billion.

We expect these investments to remain favorable for the company over the long term considering the growing demand for wireless services. However, in the near term, huge investments can substantially stress the company’s cost structure and lead to declining margins and a depressed balance sheet.

Currently, we maintain our long-term Neutral recommendation on AT&T. However, for the short term (1–3 months) the company holds a Zacks #4 (Sell) Rank.

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