AT&T 4G LTE Network Buildout Will Drive Further Data Usage Growth, CFO Says
AT&T’s expected buildout of its 4G LTE network may spark another wave of data usage growth -- and the carrier stands to benefit from that investment, said Chief Financial Officer John Stephens. “We expect that when the LTE buildout is complete for us next year, and devices catch up with our buildout, that we're going to see another step up,” he said at an Oppenheimer investor conference in Boston Wednesday (http://xrl.us/bnkue5): “Will it grow at the same rate it’s grown in the past five years? Possibly.” Overall mobile data consumption in the U.S. will reach 2 exabytes this year, said Chetan Sharma Consulting, a wireless consulting firm (http://xrl.us/bnkt4z).
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Continued data usage growth has become a “critical” part of AT&T’s revenue, Stephens said. The carrier now has 27 million customers subscribed on tiered data plans, 62 percent of its total smartphone users. The company continues to grow their use of those plans, with its new “Mobile Share” tiered shared data plans set to debut next week (CD July 19 p11). U.S. mobile shared data revenue grew 19 percent year-over-year during Q2 to a total of $19.3 billion, Chetan Sharma said in a report Sunday. That revenue now makes up 42 percent of mobile service revenue, it said. Verizon Wireless and AT&T generated a combined 68 percent of that revenue in Q2, said the report.
Further data usage growth will put AT&T in a unique position to reap the benefits, Stephens said. “As usage grows, our revenue’s going to grow,” he said. “As usage grows, we'll have demands on our network and capex, but we'll have revenues that are tied to that demand. And so we believe we're very well positioned for that. We believe as that demand grows, we're going to be able to capture that revenue within the customer base we have today and within the structure we have today.” Customers who remain on the carrier’s unlimited data plans aren’t expected to drive additional growth, since they're subject to throttling, Stephens said.
AT&T is open to expanding use of toll-free data plans, such as its e-book delivery agreement with Amazon and other companies, Stephens said. Those companies pay AT&T to deliver their products to consumers, meaning the transmission of that content doesn’t count toward the subscriber’s monthly data limit, he said. AT&T sees an opportunity to expand that model to allow other content providers to encourage use of their content by paying for its transmission, Stephens said. “If it’s daily information that can be delivered in off-peak hours ... maybe there’s a really good business arrangement that can be made on a reasonable price for that delivery in low-traffic hours,” he said. “So there’s a lot of different dynamics that are going to come in, but the new networks are going to allow for new revenue streams."
Verizon Wireless may be exploring a similar concept. Chief Financial Officer Fran Shammo suggested during a separate Oppenheimer event Wednesday that Verizon Wireless may explore an “off-peak” data service (http://xrl.us/bnkuds). Such a service would be similar to the classic model in which carriers did not count calls made during specific night and weekend periods as part of a subscriber’s monthly voice minute limit, Shammo said. “The LTE network gives us a lot of capability to do a lot of different things,” he said. “I think there’s a lot of options with that network that we can build upon.”