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AT&T Cuts Prices, Fends Competition

Zacks Equity Research

Leading telecom carrier, AT&T, Inc. (T) announced a reduction in pricing for family plans on Feb 1, including data on its G LTE network. Customers with a family of four can now switch to AT&T’s family plan that offers unlimited talk and text, and 10GB of data for $160 a month. The reduced rates are likely to draw more customers to AT&T.

The competitive pricing will also give AT&T an edge over rivals like Verizon Communications Inc. (VZ) and Sprint Corp. (S) and T-Mobile US, Inc. (TMUS).

The street reacted negatively to the price cut and AT&T’s share fell 4.11% at closing on Monday. 

Reportedly, Verizon offers a similar package for around $260 per month. As a result, AT&T is targeting those customers willing to switch to AT&T from other operators like Verizon and save around $100. 

AT&T is looking at opportunities to improve its growth profile and competitive position through a number of strategic initiatives. Last year, the company began offering AT&T Next that allows subscribers (both new and existing customers) to change their old smartphones or tablets every year without any upgrade fee or down payment. The company’s Mobile Share plan is also gaining popularity with growing post paid subscribers.

Moreover, the company is also strengthening its network quality by its project Velocity (IP) initiative, which targets business expansion. This includes expanding 4G LTE, enhancing spectrum and network capabilities, expanding U-verse services to 8.5 million new customer locations and expansion of broadband services to 57 million users, covering 75% of the company’s wireline footprint by the end of 2015.

The company is also seeking to expand its fiber network to 1 million additional customer locations by 2015. This project underlines the company’s efforts to meet the growing demand for high-speed Internet. We believe that this investment program will provide AT&T with a high-potential growth platform for revenues and earnings.

AT&T currently has a Zacks Rank #3 (Hold).

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