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Carrier Wars: Here's Why AT&T Is Still a Solid Investment

Mukesh Baghel
April 28, 2014

Telecommunications giant AT&T (NYSE: T) fell after its first-quarter earnings report as margin concerns weighed on the stock's performance. AT&T is competing in a tough market where the likes of Verizon Communications (NYSE: VZ) and T-Mobile (NYSE: TMUS) are looking to attract more customers, but the company has done well so far in retaining market share.

In addition, AT&T's strong cash generation and monetization of non-strategic assets have been fruitful and looks set to continue in the future. Let's take a look at the company's prospects to see if it could be a good investment.

Moving forward aggressively
Last fiscal year, AT&T invested $25 billion in infrastructure and spectrum, apart from returning a total of $23 billion through dividends and share repurchases. This year, AT&T expects to benefit from increasing smartphone penetration and new business opportunities in LTE. In addition, the company is focusing on connected homes, connected cars, video, and mobile business solutions.

AT&T's LTE platform is growing at a rapid pace in the U.S. It is focusing on price, customer service, technological innovation, network coverage, and quality -- to secure a competitive edge in the market. AT&T expects to reach 300 million people in 2014 with its LTE network, and its improving operations and aggressive strategies should enable it to achieve that target. 

Rivals are not sitting idle
I think AT&T is doing the right thing by building a strong LTE network as it challenges Verizon. Verizon has the largest LTE network in the U.S. with presence across more than 500 markets, covering more than 97% of the nation's population. More than 305 million people already have access to Verizon's network. At present, Big Red is trying to make its network more efficient by deploying small cells. Verizon is using Alcatel-Lucent's small cells to boost its LTE network and enhance coverage in dense, high-traffic areas. 

This move will lead to a more efficient Verizon network. But AT&T is looking to counter this with its Project VIP, under which it is investing $14 billion in 3 years to upgrade its network.

However, AT&T also needs to watch competition from smaller players such as T-Mobile and Sprint. T-Mobile is focusing on building a more consistent and reliable network. The carrier is using a 4-by-2 multiple input-multiple output technology in Chicago, Dallas, and San Antonio to deliver a better LTE experience. Moreover, as T-Mobile's EDGE network currently covers around 284 million people, according to FierceWireless, an upgrade of this network to LTE will put the company quite close to AT&T in terms of coverage. 

More reasons to be positive
AT&T is also focusing on technology solutions. The company is seeing success with its net bond service that combines the VPN network of cloud servic