AT&T Makes Big LTE Push at CES 2012

Continuing on its tradition of supporting the debutantes, AT&T (NYSE:T) will be the first wireless carrier in the U.S. to offer LTE-capable Windows Phones on its network. Microsoft’s (NASDAQ:MSFT) CEO Steve Ballmer made this announcement on stage at AT&T’s CES 2012 press conference Monday. ^[1] The debutantes in question here are Nokia’s (NYSE:NOK) Lumia 900 and HTC’s Titan 2, both of which are the respective companies’ first handsets that run on Windows Phone to support LTE and will be available exclusively on AT&T in the coming months. AT&T was also the first carrier to sell the immensely popular Apple (NASDAQ:AAPL) iPhone when it debuted in 2007, and remained its exclusive carrier until last year.

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In addition to the Windows Phones, AT&T will also launch five other Android smartphones and a tablet that are all LTE-capable. Primary among these is the long-awaited Samsung Galaxy Note, which boasts an unusually large 5.3 inch display and a stylus that can be used for handwriting. The Note will be the focus of AT&T’s marketing push, as it sees some customers preferring it over tablets, at least in the near-term.

LTE network costs to be supported by ARPU growth

AT&T has been investing heavily in its LTE infrastructure, rapidly rolling it out in new markets to make up for its relatively late entry into the space. Verizon (NYSE:VZ), the country’s largest wireless carrier, started building out its LTE network in 2010 and launched its first LTE devices at CES 2011 before AT&T decided to jump on the bandwagon. Since then AT&T’s LTE network has grown to reach around 74 million Americans currently, a huge step forward but still paling in comparison to the nearly 200 million that Verizon’s network covers.

In order to catch up, AT&T will continue to incur heavy capital expenditures for its LTE expansion plans as it looks to increase coverage. Over the last two years, AT&T has invested heavily in its HSPA+ and LTE networks and we don’t see that coming down anytime soon.

However, the unveiling of a huge lineup of LTE-capable smartphones should ensure that the carrier can at least partially recover these costs through the increased adoption of its LTE phones. Higher LTE speeds will see subscribers increasingly using data-intensive applications on their smartphones. This will drive data revenues, thereby increasing ARPU levels for AT&T over the coming years. Meanwhile, limited LTE coverage will be a deterrent for many but a fallback option in the form of the carrier’s HSPA+ network, which provides higher speeds than 3G, should offer an interim solution.

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1. AT&T at CES 2012, theVerge, January 9th, 2012 [↩]