Leading telecom company AT&T Inc. (T) is expanding its Digital Life package, home security and automation service in new markets – Orlando, Providence, Virginia Beach, Rochester, Buffalo and Syracuse. Customers in these markets can experience demo services and can also buy Digital Life from AT&T’s retail outlets. AT&T’s digital life – already available in 39 markets – is likely to reach 50 markets by 2013 end.
In Apr 2013, AT&T unveiled its Digital Life package in 15 cities including Los Angeles, Chicago, San Francisco and Miami. The product includes security cameras, thermostats and locks that can be controlled from phones and tablets. 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 that the market for home security services remains significantly unaddressed as only 1% of the U.S. households have an automated security system. As a result, the company sees financial opportunity in the $18 billion market for 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 marketing and promotional measures.
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 retains a Zacks Rank #3 (Hold).
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