Being bundled with broadband high-speed data will boost AT&T (NYSE: T) U-verse television going into the second quarter of the fiscal year, the carrier predicted in an update on its Project VIP network investment. The bundle, in fact, "reinforces the strategic rationale of AT&T's proposed acquisition of DirecTV (NASDAQ: DTV)," the company said.
While the majority of the press release detailed the network investment deals with the intricacies of the carrier's wireless business, AT&T did break out wireline trends for the second quarter including the belief that U-verse video additions will do well when "bundled with broadband," which, itself will be solid "even with second quarter seasonality and fewer migrations from DSL."
While AT&T said the bundle would help with the DirecTV acquisition, that belief was picked apart in an Investor's Business Daily story that pointed out the disparity between broadband and broadcast in the AT&T subscriber base, where only about half of AT&T broadband subscribers also take a TV service. That compares with top telco competitor Verizon (NYSE: VZ), where about 80 percent of FiOS broadband customers also buy FiOS TV.
This disparity led John Hodulik, a UBS analyst, to predict that AT&T would be more willing to sell DirecTV services and U-verse data because "it's more efficient and a better service." Hodulik further told the publication that he expected AT&T to "push U-verse TV less aggressively."
The merger will also be inefficient when compared to competitors who can provide all services across a single network, added Craig Moffett, an analyst at MoffettNathanson. AT&T will need to run separate wireline and satellite TV networks while its cable rivals can provide all their services over one network.
"The bottom line is that AT&T is taking two networks with two cost structures and two sets of equipment to compete with a competitor that offers services on a single platform," Moffett said in the Investor's Business Daily story.
While AT&T did not elaborate beyond the single bullet point, it did stated that overall it was raising full-year 2014 guidance for revenue growth and now suggesting it will be in the 5 percent range.
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