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AT&T Offers Supplier Domain Program

Zacks Equity Research

Expanding the company’s enterprise services, AT&T Inc. (T) unveiled its next generation Supplier Domain Program – Domain 2.0. The program is designed to facilitate network architecture by using modern architectural and operational approaches. The company expects the program to be launched by selective vendors that can support cloud-based infrastructure and gain from services like Network Function Virtualization (:NFV) and Software Defined Networks (:SDN). AT&T will start selecting its vendors and award contracts by 2013 end and through 2014.

AT&Tis accelerating its investments so as to accommodate advanced broadband, wireless and cloud infrastructure. As per Project Velocity IP, AT&T will invest $14 billion in the coming three years to considerably expand the wireless (investment of $8 billion) and wireline (investment of $6 billion) Internet Protocol (IP) broadband networks.

The company targets to extend wireline IP network to nearly 57 million customer locations (including both customers and small businesses) – covering 75% of AT&T’s wireline service area – by the end of 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, leading to higher revenues and improved earnings per share.

Further, a major highlight for the company is its proposed takeover of the largest prepaid wireless operator in the U.S. – Leap Wireless International inc. (LEAP) – for $1.2 billion. Including Leap’s net debt of $2.8 billion, as of Apr 15, the value of the deal is around $4 billion.

This acquisition will also give AT&T control over Leap’s spectrum in the PCS and AWS bands covering 137 million people, thereby enhancing the spectrum base of the former. AT&T plans to use the unutilized spectrum of Leap to expand its 4G LTE deployment, rendering more capacity, better network connectivity and increased mobile Internet usage. Further, the deal will endow AT&T with a stronger pre-paid business line, competitive advantage, more customer care service facilities, low-cost data plans and robust financial resources.

AT&T, which operates with other players like Verizon Communications Inc. (VZ) and Sprint Corp. (S) has a Zacks Rank #3 (Hold).

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