AT&T's Stephenson: business services, video will boost wireline business

While much of the attention on AT&T's (NYSE: T) earnings report this Thursday will be focused on wireless growth, the ILEC's wireline business will also be under the financial analyst's microscope.

Unlike its compatriot Verizon (NYSE: VZ) with its ambitious Fiber to the Premise-based FiOS last mile network, AT&T played it safe by adopting a hybrid copper/fiber Fiber to the Node (FTTN)-based network to deliver its U-Verse IPTV service.

To extend the reach of its U-Verse service to more customers, AT&T finally announced after various delays last week that it would incorporate bonded VDSL into its last mile arsenal. Still, the question is will bonded VDSL be enough to significantly scale its U-Verse IPTV service? Although AT&T has seen its U-Verse service grow in recent quarters to 2.3 million U-Verse customers, it continues to trail cable. Cable rival Comcast, for example, currently has 24 million video subscribers.

In a Financial Times article, AT&T's CEO Randall Stephenson talked about how a potential purchase of satellite provider DirecTV (Nasdaq: DTV) could help it scale its video business, a deal he believes regulators wouldn't approve.

One area of growth that Stephenson is confident about is business services. Stephenson remains confident that business services could help it drive up annual earnings growth to 10 percent if it can increase revenue by 3-5 percent, adding that "that is not a bad business at this scale."

Business services have traditionally been a strong performer for AT&T. During Q1 2010, AT&T's IP-based business data grew 5.5 percent, led by 16.7 percent growth in VPN revenues. Like its RBOC compatriots Verizon and Qwest, AT&T has found continued growth in IP services as its customers continue to transition off of legacy Frame Relay and ATM to IP-based Ethernet data services. Of course, the proof will be in the pudding as they say when AT&T announces its Q2 earnings this Thursday.

For more:
- Financial Times has this article (reg. req.)

Related articles:
AT&T: Bonded VDSL is here for real
Business, consumer IP help lift AT&T's Q1 wireline results

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