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AT&T Bolsters U-Verse Offerings

Zacks Equity Research

The second-largest U.S. mobile service provider AT&T Inc. (T) has inked a deal with Viacom Inc. (VIA) to add several Viacom channels to its U-verse TV online offerings.

With the AT&T U-verse ID, AT&T customers will now get to view the full-length episodes from BET, Comedy Central, MTV, Nickelodeon, Spike and VH1 on demand through Viacom's network-based websites like www.mtv.tve. Also, customers will soon get the access to these services on their mobile devices including smartphones and tablets.

This is the first “TV Everywhere” offering from AT&T and Viacom. AT&T’s U-verse service offerings are a huge success and gaining strong momentum in the market. Healthy growth from its U-verse video (U-verse TV and bundled satellite) services is helping AT&T to counter increasing competition in the business from its major rivals – Verizon Communications Inc. (VZ) and Sprint Nextel Corp. (S). The U-verse services coupled with support from business revenue, in particular strategic services, are driving the growth in the wireline business.

Revenue from residential customers edged up 1.7% year over year (maximum growth in more than four years) to $5.5 billion in the second quarter, driven by AT&T U-verse services. AT&T's total video subscribers, which include U-verse TV and bundled satellite customers, touched 5.8 million at the end of the second quarter. Total U-verse TV subscribers reached 4.1 million with the net addition of 155,000 customers on continued high-speed Internet attach rates. Strategic business services such as Ethernet, Virtual Private Networks, hosting, IP conferencing and application services, spiked 13.5% year over year.

We believe the expansion of U-verse services will continue to boost data revenue and ARPU (average monthly revenue per user) in the wireline segment.

We are maintaining our long-term Neutral recommendation on AT&T. The company retains the Zacks # 3 (Hold) Rank for the short term (1–3 months).

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