Report: AT&T Slowing on U-verse

U-verse might be ready to take a breather, according to one Wall Street analyst.

"Our contacts are indicating that AT&T, so far this year, is running ahead of budget on Project Lightspeed spending," partly the result of good weather in the first half of the year, writes George Notter of Jefferies & Co. Inc. in a research note published this afternoon.

It's unclear how long spending would pause, though. Notter cites two conflicting sources: One believes it's a four-to-six-week pause, while the other thinks AT&T has met its U-verse expectations for the entire year.

Notter's is a relatively optimistic view. He doesn't agree with another analyst's prediction that AT&T will cut its planned spending by 10 percent.

As for which vendors would be affected, Notter lists ADC Telecommunications Inc. (Nasdaq: ADCT), Adtran Inc. (Nasdaq: ADTN), Alcatel-Lucent (NYSE: ALU), Ciena Corp. (Nasdaq: CIEN), CommScope Inc. (NYSE: CTV), Sonus Networks Inc. (Nasdaq: SONS), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA) as having the most exposure to AT&T.

Notter doesn't list Ericsson AB (Nasdaq: ERIC). But it's worth noting that AT&T is using that vendor's Gigabit passive optical network (GPON) gear, and AT&T's fiber-to-the-premises (FTTP) efforts have "come to a standstill" as U.S. housing starts have fallen, Notter writes. These greenfield deployments are just a sliver of the overall U-verse buildout, though. (See AT&T Picks GPON Players.)

Some vendors' earnings indicate they are seeing the spending slowdown they've been on the lookout for. Adtran Inc. (Nasdaq: ADTN), which reported record profits last week, warned that things could cool off for a while as carriers get jittery about spending. Adtran did not specifically name AT&T, however. (See Adtran Hints at Slowdown.)

But it's not all doom and gloom. Wireless, which contributed very weak spending levels in 2007, is in dire need of infrastructure upgrades, thanks mainly to the Apple Inc. (Nasdaq: AAPL) iPhone, which has taxed many of the carrier's 3G base stations. (See Cingular Capex Cure Coming? .) "This translates into more new 3G base stations and more capacity expansions on existing base stations," Notter writes.

AT&T wouldn't comment beyond reiterating that spending is expected to be in the mid-teens as a percentage of revenues.

— Raymond McConville, Reporter, Light Reading