Analyst: AT&T must boost cap-ex to keep up

AT&T Mobility, which has acknowledged that its network has not been up to par in certain metro areas, must spend an additional $5 billion on its wireless network to catch up to the coverage offered by Verizon Wireless, an analyst firm said.

Gerard Hallaren, director of research at TownHall Investment Research, said AT&T needs to spend more to keep up with its rivals. Yesterday, the firm cut its rating on AT&T from "Favorable" to "Neutral."

"It has a choice to spend or suffer," Hallaren noted. He said part of AT&T's problem is that it spends more to upgrade its wireline infrastructure than its wireless network, even though the wireless business makes up a majority of its profit. The firm said that while AT&T has outspent Sprint Nextel from 2006 through September 2009 on its wireless network, AT&T has lagged behind Verizon's investment. During that period, according to TownHall, Sprint's total wireless cap-ex was around $16 billion, AT&T spent $21.6 billion and Verizon spent $25.4 billion.

Last year, AT&T said it would spend between $17 billion and $18 billion in total capital expenditures, with around $11.6 billion going into wireless infrastructure. The company said earlier this month it had upgraded its 3G cell sites across the country with HSPA 7.2 software. However, AT&T clarified that it is still working to increase its backhaul capacity to the sites, a job that it will continue into 2011.

AT&T said the software upgrade will "result in a better overall customer experience by generally improving consistency in accessing data sessions." The carrier said it has already deployed backhaul improvements in Charlotte, N.C., Chicago, Dallas, Houston, Los Angeles and Miami. AT&T said it expects the majority of its mobile data traffic to be carried over the expanded fiber-based, HSPA 7.2-capable backhaul by the end of 2010, with deployment continuing to expand in 2011.

Further, AT&T will begin testing LTE in 2010, with deployment beginning in 2011.

An AT&T spokeswoman did not immediately respond to a request for comment about TownHall's assertions.

For more:
- see this IDG News Service article

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