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AT&T Digital Life in New Markets

Zacks Equity Research

AT&T Inc. (T) is about to launch Digital Life package in six additional markets that include New Haven and Bridgeport, Colorado Springs, Memphis, Mobile and Pensacola. Customers can avail the live demo and buy the product from AT&T’s retail outlets. 

In Apr 2013, AT&T unveiled its Digital Life package in 15 cities including Los Angeles, Chicago, San Francisco and Miami among others and ended up with announced or completed launches in 58 markets. 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 drive revenues in the coming years.

The company stated that the market for home security services is significantly unaddressed as only 1% of 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 expect the addition of Disney content to lead to 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).

Other Stocks

Other stocks to consider in this sector are Shenandoah Telecommunications Co. (SHEN) and Telstra Corporation Limited (TLSYY). Both carry a Zacks Rank #1 (Strong Buy).

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