AT&T Inc. T has inked a contract with the city of Amarillo, TX, for $24 million to build a state-of-the-art fiber network across the region. The project, contingent upon the funding approval by the city, aims to bridge the digital divide by connecting more than 22,000 customer locations with improved broadband connectivity.
Over the past few quarters, AT&T has been focusing on aggressive fiber build-out initiatives as it seeks to connect 3.5-4 million additional locations with fiber each year to significantly increase its existing fiber footprint to more than 30 million locations by the end of 2025. The company expects that 75% of its network footprint will be either served by fiber or 5G, which will likely halve its legacy copper services exposure. These simplification initiatives are likely to drive additional cost savings while creating new revenue-generating opportunities.
The carrier is striving to become the leading broadband provider in the country, focusing on 5G and fiber network connectivity, as the industry continues to benefit from a healthy uptick in demand in the post-pandemic market revival. The company is aiming to profitably increase its postpaid subscriber base by leveraging its network quality and market penetration capabilities. Riding on its go-to-market strategy, AT&T expects to witness healthy subscriber momentum with the migration of customers to its unlimited plans.
While optimizing operations, AT&T intends to deploy 120 MHz of mid-band spectrum to considerably expand its 5G coverage, which currently spans more than 16,000 cities and towns, covering above 255 million people. In order to upgrade its existing infrastructure facilities for 5G and fiber deployment, AT&T plans to invest $24 billion each in 2022 and 2023, and about $20 billion starting from 2024. As a standalone company, it intends to pay more than $8 billion in dividends to shareholders, which represents a payout of about 40% against the expected free cash flow of $20 billion in 2023. It further plans to reduce its net debt to adjusted EBITDA ratio to the 2.5 range by the end of 2023.
AT&T is increasingly focusing on its customer-centric business model to attract and retain customers for a lower churn rate. The company is witnessing healthy momentum in its postpaid wireless business with increased adoption of higher-tier unlimited plans. This, in turn, is expected to result in year-over-year growth in wireless customers with unlimited tariff plans.
The stock has lost 28.4% in the past year compared with the industry’s decline of 16.5%.
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Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Sierra Wireless, Inc. SWIR carries a Zacks Rank #2 (Buy) in the broader industry. It has a long-term earnings growth expectation of 15% and delivered an earnings surprise of 223.7%, on average, in the trailing four quarters.
Over the past year, Sierra Wireless has gained 23.8%. Earnings estimates for the current year for the stock have moved up 616.7% since June 2021. The company continues to launch innovative products for business-critical operations that require high security and optimum 5G performance.
InterDigital, Inc. IDCC sports a Zacks Rank #1. It has a long-term earnings growth expectation of 15% and delivered a stellar earnings surprise of 141.1%, on average, in the trailing four quarters. Earnings estimates for the current year have moved up 69.1% since June 2021.
InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas. InterDigital’s global footprint, diversified product portfolio and the ability to penetrate different markets are impressive.
TESSCO Technologies Incorporated TESS, carrying a Zacks Rank #2, delivered an earnings surprise of 61.9%, on average, in the trailing four quarters. Earnings estimates for TESSCO for the current year have moved up 40.7% since Jun 2021.
TESSCO offers products to the industry’s top manufacturers in mobile communications, Wi-Fi, wireless backhaul and related products. With more than three decades of experience, it delivers complete end-to-end solutions to the wireless industry.
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