During AT&T’s fourth quarter earnings call, CEO Randall Stephenson reaffirmed the company’s commitment to its $14 billion Project Velocity IP, saying that spending will be at its highest level this year. “2014 is our peak year for VIP investment and our outlook is very consistent with that original plan,” he said. “We’ll continue to be aggressive on the network front. We expect to hit our LTE coverage targets ahead of schedule this year. We also have a big effort in terms of network densification and cell sites.”
AT&T says that its 4G LTE network now covers 270 million people and that 42% of its postpaid smartphone customers use a 4G LTE device. Studies have shown that when subscribers get access to LTE, their data usage often increases exponentially, and that video downloads in particular are likely to skyrocket.
“Video, we believe, is a big growth opportunity so we have a major initiative to make our network the best in class for video delivery for both wireline and wireless,” said Stephenson. “Longer term, we’re taking the lead in virtualizing our network, to shift functionality from hardware to software. And over time we believe the payoffs in operating efficiency and speed to market are going to be significant.”
Price cuts in prepaid
AT&T said its acquisition of Leap Wireless, which owns the Cricket prepaid brand, will close in the first quarter. Stephenson said yesterday that for years AT&T was reluctant to “move down market” because it wanted to preserve network quality and capacity for its high value customers. But LTE is changing that, he said, by boosting network performance and capacity. “It’s created a whole new opportunity for us to think about the value segment and the no-contract segment,” he said.
“What we have seen in terms of moving smartphones, deeper and deeper penetration on postpaid, that play has yet to be run in the prepaid segment to any meaningful degree,” Stephenson continued. “You should expect us to be very assertive and very aggressive to push smartphone penetration in the no-contract space and to be aggressive as it relates to pricing. We’ll be using a different brand; we can do some things that will be disruptive in the market and we’re actually getting more and more excited about it the closer we get to closing in the first quarter.”
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