(T) AT&T Offers Home Security

Leading telecom company AT&T Inc. (T) will unveil the Digital Life package, its home security and automation service, on May 3, in 15 cities including Los Angeles, Chicago, San Francisco and Miami. The new product includes security cameras, thermostats and locks that can be controlled from phones and tablets.

The company targets to penetrate 50 markets with its digital life products by this year-end. We believe that product diversification will enable AT&T to grow beyond its legacy market and generate incremental revenues in the coming years.

The company stated in its press release that the market for home security services remains significantly unaddressed as only 1% of the U.S. households have automated security system. As a result, the company sees a potential financial opportunity to tap an $18 billion market of automated home security systems.

AT&T has so far seen more success in this market compared to its peers thanks to its own technology in home security digital products and adequate measures to market and promote these products.

AT&T has priced the equipment and installation of a home security package for $250 with monthly charges of $40 per month. In addition, the company also offers a camera package for $10 per month along with equipment and installation, climate control for $5 per month, and a remote water main shutoff control for $10 per month. However, a basic package with only security would cost around $150 initially and $30 per month.

The company already enjoys strong momentum in both wireline and wireless businesses. While continued strength in smartphones is fueling growth in wireless business, wireline is benefiting from growth in its U-verse and strategic services.

AT&T is the leader in WiFi (wireless broadband) connectivity with over 30,000 domestic and 190,000 international hotspots. We believe the addition of Disney content will fuel growth in U-verse services, resulting in higher data revenues in the wireline segment.

Other positive attributes for the company include a strategic realignment initiative and a healthy financial profile. However, persistent access line losses, competitive pressure from the likes of Verizon Communications (VZ) and regulatory issues will likely weigh on the stock in the coming days.

AT&T, which competes with other industry players like Sprint Nextel Corp. (S) and MetroPCS Communications, Inc. (PCS) retains a Zacks Rank #3 (Hold).
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