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AT&T Augments Spectrum Capacity for Extensive 5G Rollouts

Zacks Equity Research

Following the completion of the latest round of telecom spectrum auction by the Federal Communications Commission – FCC Auction 102 – AT&T Inc. T has emerged as the leading bidder among all participants. The company has reportedly won spectrum licenses that cover about 98% of the U.S. population, offering it a competitive advantage for seamless 5G deployment across the country.   

In particular, AT&T has won 24 GHz spectrum in 383 Partial Economic Areas for a nationwide average of 254 MHz. Bulk of the license wins were secured in the upper 500 MHz portion of the 24 GHz band, which will enable the company to command a strong nationwide coverage with solid spectrum depth and capacity in several top markets where demand is often the greatest. Notably, AT&T has won nearly 286 MHz of broadband spectrum on average in the top 10 markets.   

With cumulative expenditure of about $980 million, AT&T has won spectrum licenses in all the top 50 Partial Economic Areas and 99 of the top 100 Partial Economic Areas. Combining the mmWave spectrum tally in the 39 GHz band, the company currently boasts more than 630 MHz of nationwide mmWave spectrum for an unrivaled coverage across the country.

AT&T intends to utilize the spectrum licenses to speed up its 5G deployment throughout the United States. Currently, its 5G services are available in select markets in 19 cities. AT&T aims to increase this tally to 29 by the end of 2019.

As the first carrier in the industry, the company has unveiled its 5G policy framework that will hinge on three pillars — mobile 5G, fixed wireless and edge computing. In order to have a seamless transition among Wi-Fi, LTE and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network in early 2020. The company’s 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. AT&T believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices.

AT&T anticipates gaining an advantage over rivals through edge computing services that allows businesses to route application-specific traffic to where they need it and where it’s most effective — in the cloud, the network or on their premises. Through its Multi-access Edge Compute (MEC) solution, the company offers the flexibility to better manage data traffic. The MEC leverages indigenous software-defined network to enable low-latency, high-bandwidth applications for faster access to data processing. AT&T expects edge computing solutions to be widely available in autonomous vehicles, drones, robotic production lines and autonomous forklifts in the near future. Utilizing machine learning techniques and more connected devices, this could transform the way data-intensive images are transferred across the industry on real time basis.

We remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. The stock has outperformed the industry year to date with an average return of 13.2% compared with the 8.3% rise of the latter.

Some better-ranked stocks in the industry are United States Cellular Corporation USM, sporting a Zacks Rank #1 (Strong Buy), and Gogo Inc. GOGO and T-Mobile US, Inc. TMUS, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United States Cellular surpassed earnings estimates in each of the trailing four quarters, the average positive surprise being 79.3%.        
Gogo beat earnings estimates in each of the last four quarters, the average positive surprise being 38.7%.  
T-Mobile has a long-term earnings growth expectation of 13%. It beat earnings estimates in each of the preceding four quarters, the average surprise being 12.1%.

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