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AT&T Gets OnStar Deal

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AT&T, Inc. (T) has reportedly edged out Verizon Communications Inc. (VZ) to secure General Motors Company’s (GM) contract for providing wireless connections to 2015 car models. AT&T will be the wireless service provider for General Motors’ OnStar service, which connects drivers to live operators for directions or help during emergencies. Since 1996, Verizon has been the service provider for OnStar and will continue to remain so for any model launched before 2015.

The OnStar deal is another feather in AT&T’s cap. AT&T is already into similar agreements with other automobile companies – Ford Motor Co (F) and Nissan Motor Co. However, the company claims that the OnStar contract is the biggest in its history that will likely translate into significant financial synergies. OnStar customers are expected to subscribe to AT&T’s shared data plan that allows single account operation through multiple devices.  

AT&T – the largest provider of wireless services in North America – is experiencing strong momentum in wireless businesses. Continued strength in smartphone and branded computing device sales are fueling growth in the wireless sector.

The company boasts the best Internet speeds in the industry as it is the only U.S. carrier that provides 4G networks through both Long Term Evolution (:LTE)and High-Speed Packet Access Plus (HSPA+) technologies.

The company’s LTE networks serve asthe benchmark of mobile technology and the life-blood for operators across the world. The company is on track to deploy 4G Long-Term Evolution (:LTE) services as early as possible and achieve the target of connecting 250 million people by 2013-end and 300 million people by year-end 2014.

However, risk factors such as a saturated wireless market, persistent losses in access lines, labor union issues and aggressive pricing plans of direct competitors are likely to weigh on the company’s revenues and margins in the near to medium term.

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

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