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AT&T Digital Life in More Markets

Zacks Equity Research

AT&T Inc. (T) announced that the company would launch its Digital Life package in six additional markets including Charlotte, Hartford, Jacksonville, Oklahoma City, Tulsa and Milwaukee on Friday this week. Customers can avail the live demo and buy the product from AT&T’s retail outlets.  

Last month, the company expanded its home security and automation service package, Digital Life Orlando, Providence, Virginia Beach, Rochester, Buffalo and Syracuse. By the year end, AT&T expects to take its Digital Life package across 50 markets.

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 is 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 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 stock to consider in this sector include PortugalTelecom, SGPS S.A. (PT) and Hawaiian Telcom Holdco, Inc. (HCOM), both with Zacks Rank #2 (Buy).

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