AT&T Shines a Light on Lightspeed

Tells investors and analysts that its Project Lightspeed will debut in 21 US markets by year's end

February 1, 2006

3 Min Read
AT&T Shines a Light on Lightspeed

AT&T Inc. (NYSE: T) told analysts and investors Tuesday it will begin scaling up Project Lightspeed and will build out a 40-Gbit/s long-haul network during 2006.

Regarding Lightspeed, AT&T says it is still on track and will reach 21 markets this year. (See AT&T Updates 2006 Plans.) Though the services are only in San Antonio at the moment, the carrier still seems bullish that it can pass 3 million homes with its new network before the year's end.

Of course, that's going to leave a lot of folks wishing they lived in one of the select ZIP codes in which the carrier has chosen to build its next-generation access network. For them, AT&T has officially announced "Homezone" -- its plan for a triple-play bundle of DSL, phone, and satellite TV service. The company anticipates this to launch in the second quarter.

AT&T also said it is still planning to deploy its 3G UMTS/HSDPA wireless data network in most of the top 100 metropolitan areas by the end of 2006.

The company "guided wireline capex in 2006 to total $8.0-$8.5B (low teens as a percentage of revenue) up from $6.9B in 2005 primarily due to an incremental $1.4B in capex from Project Lightspeed and some merger integration spending," writes Lehman analysts Jiong Shao and Marcus L. Kupferschmidt in a note to clients today. "Additionally, AT&T provided guidance for 2007 and 2008 capex in the low teens as a percentage of revenue, with incremental capex from Project Lightspeed of $1.7B in 2007 and $1.3B in 2008, higher than originally thought due to recent planned enhancements to the infrastructure."

The company gave analysts a rosy picture of the “new” company’s future, stressing that the benefits hoped for in the merger of SBC and AT&T will begin showing up on the bottom line this year. In fact, AT&T told analysts it will deliver double-digit adjusted EPS growth in each of the next three years as a result of new “synergies.” (See BellSouth at a Crossroads.)

"Merger integration is on a good track, and we continue to execute well on all fronts,” AT&T CEO Ed Whitacre told analysts in New York City Tuesday. “We are confident that synergies from the AT&T merger will be larger, and that they will come sooner, than in the outlook we provided a year ago.” (See FCC Clears Megamergers.)

AT&T’s wireless affiliate Cingular Wireless , which it co-synergizes with BellSouth Corp. (NYSE: BLS), plans to deploy its 3G UMTS/HSDPA synergistical wireless data network in most of the top 100 metropolitan areas by the end of this year, the synergizing company says. (See Cingular Reports Q4.)

AT&T also addressed concerns over the company’s reliance on its shrinking voice business. “In terms of revenue mix, including proportionate results from Cingular Wireless, more than three-fourths of AT&T's revenues come from wireless, business and wholesale, with less than one-fifth coming from consumer voice services,” according to a statement from the carrier.

Finally, AT&T said it will start upgrading its optical backbone to OC768 (40 Gbit/s) throughout 2006. Several vendors will see some action here, analysts say, not the least of which include Siemens AG (NYSE: SI; Frankfurt: SIE), the incumbment long-haul DWDM supplier, and Ciena Corp. (NYSE: CIEN), which has several long-haul switches in AT&T's network.

"We also highlight our expectations that AT&T is ready to begin deploying initial ROADM metro optical systems instead of additional SONET ADM capacity, likely from Fujitsu," write Lehman's analysts. "We believe over time AT&T may look for a second source to Fujitsu which could open up 7100 opportunities for Tellabs down the road, and note this deployment underscores our views about the emergence of the ROADM market in 2006/2007."— Mark Sullivan, Reporter, Light Reading

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