Keeping the Customer Happy

AT&T, the country’s No. 2 wireless carrier behind Verizon, has been outspent on its wireless network even though wireless provides the bulk of operating income, according to TownHall data.

Of every dollar of capital expenditures at AT&T, roughly 65 cents goes to wireline and 34 cents goes to wireless, with 2 cents going to other uses. The wireless business contributes 57 cents of every dollar of operating income, compared with 35 cents for the wireline business, TownHall numbers say.

A growing percentage of that wireless income is coming from iPhone users. The sales are lucrative, but heavy data use by iPhone users puts a strain on wireless systems—and that has led to consumer sentiment turning against the Dallas-based carrier, Hallaren says.

This past summer, PC World ran tests in 13 large cities, including Dallas, and concluded that Sprint and Verizon Wireless’ mobile broadband networks were more reliable. And late last year, Consumer Reports’ annual survey of wireless customers’ satisfaction with their carriers ranked AT&T last and Verizon Wireless first.

Verizon hasn’t been shy about exploiting AT&T’s perceived weakness.

AT&T officials concede that their network hasn’t always performed as well as they might have liked in densely populated markets such as San Francisco and New York, two cities that have a lot of iPhone users. But they’ve maintained a consistent message over time that the wireless network is generally up to par and say the business will roll out a series of upgrades going forward.

Reinforcements on the Way

Between 2008 and the third quarter of 2009, according to Butler, AT&T spent $19 billion on its wireless operation, including reinforcing its network, purchasing wireless spectra, and doing acquisitions.

For 2010, AT&T will spend about $18 billion to $19 billion on its wireless and wireline networks, she said. That number will include an increase of roughly $2 billion in wireless spending compared with 2009.

Plans include an aggressive deployment of fiber optics for the backhaul portion of its wireless network. This involves moving phone calls and data from a remote site to a central site in the network.

“That will support faster speeds on our 3G (third generation) network,” Butler said.

The business will also add about 2,000 cell sites this year and has an aggressive plan to boost the capacity and performance of its networks in New York and San Francisco, Butler said.

Stephane Teral, a California-based principal analyst at Infonetics Research, is a self-proclaimed “defender of AT&T.” He said that although the company has had issues with its wireless network, it’s not fair to bash AT&T when comparing it to Verizon Wireless. The reason: The two networks use different technical standards, and Verizon’s network hasn’t been tested by the demands of iPhone users.

Teral said AT&T is working out its kinks.

“They’ve been addressing the issues,” he said.

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Jeff Bounds is a staff writer for the Dallas Business Journal.