Jeff Kagan: AT&T Beyond Mobility

Jeff Kagan  |

Wireless and telecom are changing. That said, over the next several years, every wireless and telecom company, carrier, handset maker and more will be changing as well. Over the last decade AT&T (T) and AT&T Mobility have been leaders in the carrier transformation. They are at the forefront of not only expanding their company, but of transforming and expanding the entire communications industry. Let’s take a closer look:

In the new book I'm writing called Wireless and Telecom of Tomorrow, we take a look at the changing companies transforming the changing wireless and wire line telecom industry. It discusses a recent AT&T analyst meeting, which is their annual get together where they gave the audience a reality check.

Pull the Camera Back

If we pull the camera back and take a longer-term historical look at the changing communications industry, we can see how the industry is radically shifting. In that current, AT&T has been one of the leaders. They are one of the companies who steer the direction of the changing industry. And they have successfully caught wave after wave of change the industry has seen.

They were the first to focus on smartphones. The first to offer the iPhone, and in fact the only provider to do so for years. Their fast 4G speeds empowered a new generation of wireless power users.

The wireline side of the business was a growth industry until roughly fifteen years ago. AT&T and Verizon (VZ) sold more local phone lines, year after year, until that time. Then assorted other technologies and competitors jumped in like wireless, VoIP and so on. AT&T and Verizon started losing local phone lines, but they shifted and made that up with wireless growth.

Wireless Growth is Changing

Wireless growth has been amazing over the last seven or eight years since the iPhone and Android entered the scene and changed the industry. Apps exploded from a few hundred to well over a million today.

However, today, just about everyone who wants a smartphone has a smartphone. So new customer growth from all the players is slowing. Now, wireless growth is starting to change. In what direction will it head going forward? Let’s take a look:

Wireless Industry Splitting into Two Segments

The wireless industry is splitting into two distinctly different parts. One part has companies like Sprint (S) and T-Mobile (TMUS). They are wireless-only plays. The other part has companies like AT&T Mobility and Verizon Wireless. They are much larger plays with wireless, wire line, television, Internet and so on.

Going forward, unless we are talking strictly about wireless, I don’t think we will compare AT&T and Verizon to Sprint and T-Mobile. They will be in two different segments of the wireless industry as it splits into these two segments. There is nothing right or wrong with either segment, they are just different.

AT&T and Verizon are on the side that offers quite a few services. However, like every industry, communications goes through waves of growth. Local phone service grew until the early 2000’s then started to decline. Wireless has grown for decades, with an acceleration with the iPhone and Android several years ago. Now that growth wave is slowing.

Television has been a key growth area for AT&T and Verizon. Their IPTV service has shown strong growth. However, AT&T is still actively rolling out their Uverse and DirecTV, while Verizon has slowed. With all that said, a split seems to be occurring now however.

Next AT&T Growth Wave

Knowing that the marketplace has different growth waves, each lasting only a limited period of time, AT&T keeps introducing new growth waves. Verizon should know this as well, however they have not been as active as AT&T in expanding and creating the next growth waves.

The moves AT&T has made over the last couple years are acquiring DirecTV and the Mexican cell phone carrier show a strong growth mode. DirecTV let’s AT&T compete in the television market nationally. Plus, by adding wireless TV or mobile TV, AT&T continues to transform industries.

Verizon, while they have made several acquisitions, like AOL, and their attempt to acquire Yahoo (YHOO) have not really shown the same kind of growth or traction recently. Verizon tells us to wait. That they are positioning themselves for future growth which we will see in the next couple years. Let’s hope that’s true.

Who AT&T and Verizon Really Are

Maybe this is just a matter of who each company really is. AT&T is not the same company we grew up with. AT&T was fading and dying and was acquired by Texas based SBC. This was a baby bell who also acquired BellSouth and Cingular and transformed these four different companies into a giant powerhouse.

AT&T recent acquisitions like the Mexico cell phone company and DirecTV have been very successful. Mexico opens up all sorts of new opportunities for AT&T. DirecTV has been seeing strong growth since AT&T upgraded the offer to include wireless television or mobile TV. That lets customers watch television on their wireless devices like smartphones or tablets using the wireless network.

This is a transformational idea which is not only transforming AT&T, but the entire industry. This is sending competitors like Comcast (CMCSA) back to the drawing board meeting with Verizon Wireless to come up with a competitive answer.

We have seen AT&T and Verizon on different growth tracks for a while. AT&T is more aggressive. AT&T is there first. Always opening new market areas first. Think of the iPhone as an example. Apple approached Verizon and AT&T. Verizon said no. AT&T said yes. And that started the next growth wave in the smartphone world.

AT&T Going Forward

Going forward expect AT&T to continue to push the envelope with new offerings in new segments. Things like smart homes to helping other industries go wireless to transform the way they do business.

Think of the automobile industry where cars are connected to the Internet offering Wi-Fi connectivity to everyone inside and keeping the car connected to the manufacturer and downloading updates and fixes on a regular basis.

Think about the healthcare industry which is embracing wireless to empower health care professionals and patients. This is improving the entire medical experience for everyone. This is improving healthcare.

Plus, there are countless other industries which are being updated as well. We are just at the very early point in this opportunity curve. This is a huge growth opportunity for any wireless carrier and handset maker. Not every company is active in this area. AT&T is a player.

IoT, Cloud, M2M, Mobile Pay and More

Looking ahead, IoT or the Internet of Things, the Cloud and Mobile Pay are three very important growth areas for wireless and telecom sector. According to their analyst briefing, this means it is a great opportunity for AT&T. We are just in the very early stages of these new areas and they will be where every player will have strong focus.

Not only AT&T, but Verizon, Sprint, T-Mobile, CenturyLink (CTL), Comcast, Time Warner Cable (TWC), Charter (CHTR), Cox, Apple (AAPL), Google (GOOG), Samsung, Microsoft (MSFT) and many more. Every company is coming at these new opportunities from a different direction. Some are focused on the consumer. Others are focused on the business customer. While others are focuses on the M2M growth opportunity.

Expect AT&T Growth to Remain Strong, But Different

So I see growth in the future as very strong, but very different from what we have become used to in this industry. Sector walls keep falling letting single companies compete in multiple sectors. I see AT&T continuing to lead in the expansion of who they are and of the industries they participate in.

There will be all sorts of new technologies that we will be using that will tickle us whether we be consumers, businesses or governments. Other industries will continue to change as the cloud, IoT, M2M and Mobile Pay change everything. And I see AT&T continuing to be one of the key leaders in this transformation.

Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay and communications technology. Email him at jeff@jeffKAGAN.com. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Companies

Symbol Name Price Change % Volume
TWC Time Warner Cable Inc n/a n/a n/a 0 Trade
S Sprint Corporation 6.39 0.04 0.63 9,766,801 Trade
TMUS T-Mobile US Inc. 81.36 -0.31 -0.38 1,309,199 Trade
VZ Verizon Communications Inc. 60.88 0.11 0.18 10,461,906 Trade
GOOG Alphabet Inc. 1,259.13 16.33 1.31 928,595 Trade
CTL CenturyLink Inc. 13.09 0.28 2.19 14,978,291 Trade
YHOO Yahoo! Inc. n/a n/a n/a 0 Trade
T AT&T Inc. 37.74 -0.43 -1.13 24,362,381 Trade
MSFT Microsoft Corporation 137.24 0.87 0.64 31,380,309 Trade
CMCSA Comcast Corporation Class A Common Stock 45.72 -0.05 -0.11 23,521,466 Trade
AAPL Apple Inc. 243.18 3.22 1.34 19,932,545 Trade

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