(T) AT&T Slashes Smartphone Prices

Telecom giant AT&T Inc. (T) is introducing new promotional plans to accelerate smartphone sales.  The company will offer a $100 rebate on the purchase of a new smartphone in exchange for an older one. The offer is available on newly launched smartphones like Samsung Galaxy S 4, Research In Motion Limited’s (BBRY) Blackberry Z10 and HTC One. Currently, these devices come with a two-year agreement at $199.00 but after the exchange offer, AT&T customers can avail them at $99.00.

We believe that the AT&T’s current promotional plan will attract customers and result in higher equipment revenues. In addition, these measures would enable the company to strengthen its footprint in the LTE space as most of these new devices support LTE network usage, which make them attractive in the current market. AT&T has benefited significantly through recycling of old devices. According to the company’s press release, customers recycled over 3.1 million phones, a record number within a week. This also signifies that the acceleration in smartphone sales has also resulted in higher data revenues for the company as these support enhanced Internet experience on AT&T’s advanced networks.

Currently, AT&T boasts the best Internet speeds in the industry, as it is the only U.S. carrier that provides 4G networks through both Long Term Evolution (LTE) and High-Speed Packet Access Plus (HSPA+) technologies. AT&T’s LTE networks serve as the benchmark of mobile technology and the life-blood for operators across the world. The company is running ahead of schedule in the deployment of 4G Long-Term Evolution (LTE) services. The company has, currently, covered about 200 million with its LTE services and expects to achieve the target of connecting 90% of 300 million people by 2013-end.

Further, the company is actively working on improving content services for wireless users. The company introduced its new cloud-based Content Delivery Network (CDN) platform in Feb 2013. The attractively priced CDN offers best-in-class digital media solutions. The company also collaborated with Zynga, a popular Web-based social gaming company to offer mobile social gaming options on its Google Android-based smartphones and tablets. Additionally, AT&T inked a multi-year deal with The Walt Disney Company (DIS) and entered into a cloud-based video conferencing service agreement with Polycom, Inc. (PLCM).

We believe these initiatives would support significant market penetration in the wireless space. However, the company suffers constant access line losses, competitive threats, heavy smartphone subsidies and federal regulations. These could hold back its prospects.

AT&T retains a Zacks Rank #3 (Hold).
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