Editor’s note: Eric Costa is an analyst with Technology Business Research, a market research and consulting firm specializing in the business and financial analysis of hardware, software, professional services, telecom and enterprise network vendors, and operators.

AT&T is positioning itself as a leading provider of fourth-wave mobility services from connected devices (the first three waves were voice, messaging and data access) that will deliver new revenue streams and drive customer growth through the next decade. As earlier waves of services experience slowing revenue growth, AT&T is backing new services that will leverage its nationwide mobile data network. Connected devices will become a major growth initiative for AT&T, driven by the company’s Mobile Share plans, LTE network speeds and expanding device portfolio. The transition from subscribers to connections will create revenue opportunities over the next six years. AT&T is positioning itself to take advantage of these areas to ensure growth will continue past the current smartphone penetration phase. AT&T’s fourth-wave initiative is a sound strategy: While not all of its new services will drive immediate growth, each one gives the company access to new markets and positions it to build services people rely on in their daily lives.

AT&T will look to drive new growth across its LTE network by connecting new devices and services that leverage its LTE network and encourage consumers to add multiple devices to their subscriptions. The operator’s Mobile Share plans will continue to gain traction over the next two years. Adding new connections will result in revenue growth and connected devices adoption, as these plans encourage higher consumption of data across multiple types of devices. The Mobile Share plans will continue to be an intricate part of AT&T’s portfolio and will drive data revenue growth over the next six years as the connected devices segment takes off and becomes a main contributor to overall subscriber additions and revenue growth. Getting involved in these verticals early allows AT&T to target early adopters of these new technologies and increase its market share in new segments. These segments include Digital Life, connected car, healthcare, business and mobile payments.

AT&T laid out its vision for long-term growth at its 2013 Consumer Analyst Conference in Atlanta:

  • Become the leader in retail net additions by 2020, including in the postpaid, prepaid and connected devices
  • Complete initial LTE network and Project VIP to provide LTE capacity and coverage across AT&T’s footprint and expand the wireline business.
  • Develop data services in new verticals including security, healthcare, mobile payments and connected car.
  • Grow wireline segment revenue through fiber and U-verse expansion.

Each of these areas will incorporate AT&T’s wireless LTE network and drive customer and revenue growth for the operator over the next six years.

Impact and Opportunities

AT&T is looking to embed its services in as many aspects of consumers’ lives as possible. The intent is for its networks to act as the glue that connects customers to the services they use, whether from AT&T or others, as well as to create new services that appeal to customers. With each new service, AT&T builds additional capabilities into existing and new products, and will use its scale to create a critical mass that will drive service adoption over the next six years.

AT&T’s time-to-market advantage in new fourth-wave data services such as Digital Life and connected car will allow the operator to gain a significant advantage over the competition as Verizon, Sprint and T-Mobile attempt to play catch up to AT&T in this space in the next couple years. This, coupled with the company’s expanding LTE network, will allow AT&T to expand into growth areas and find opportunities in adjacent businesses that make
sense for the operator. AT&T will capitalize on its LTE network, lead in connected devices and fourth-wave partnerships to address new potential markets and continue to grow connections and revenue through 2020.


AT&T remained one of the leaders in the postpaid market in 3Q13. The operator is targeting the lead in postpaid net additions over the next six years and will face fierce competition from Verizon and the re-emergence of TMobile. Verizon has been No. 1 in the postpaid market in recent quarters due to its lead in LTE coverage and Share Everything plans. AT&T will soon complete its initial LTE build to match Verizon’s LTE footprint, and once Project VIP is complete, the operator will cover 300 million POPs. AT&T also moved to exclusively offering its Mobile Share plans in 3Q13, which will boost adoption in these plans in 2014. AT&T and Verizon will remain the two postpaid giants and AT&T’s long-term strategies will position it to take over the top position.

T-Mobile also poses a threat in the postpaid space with its Simple Choice plans and tablet promotional offers. In the short term, AT&T will find it challenging to draw in the highest postpaid net additions as T-Mobile attempts to steal subscribers by offering low-priced plans and free data to tablet users. This especially hurts AT&T as the bulk of 3Q13 postpaid net additions came from tablets. To combat this, AT&T launched its new Mobile Share Value Plans to help retain its postpaid smartphone subscribers and draw in competitor’s customers. These plans, in addition to AT&T’s Next program, will position the operator to bring in high postpaid net additions by the end of 2014.


Though AT&T’s main focus will remain with the connected devices and postpaid segments due to their high-value customers, the operator will also target growth in the prepaid segment to become the leader in net additions by 2020. This will be a hard goal to meet, as Sprint and T-Mobile typically control the prepaid market and lead in total prepaid subscribers. AT&T will target growth through its Aio Wireless and soon-to-be Leap Wireless brands to draw in cost-conscious customers. Once the Leap acquisition closes, AT&T will integrate these two brands into one larger prepaid offering. The operator will also use its LTE network over the next few years to offer high-quality, fast network speeds to its prepaid base. In the past, AT&T has been a laggard in the prepaid space, yet the emergence of Aio Wireless in 2H13 resulted in AT&T adding the highest prepaid net additions in 3Q13 (192,000). TBR believes AT&T will trail Sprint in prepaid net additions over the next two years but has a solid strategy in place to become a
long-term competitor in the prepaid segment.

Digital Life

AT&T demonstrated its Digital Life home automation and security solution to analysts in Atlanta for the second year in a row. With home security and automation, AT&T sees an opportunity to capture and grow in the divided and segmented home security and automation market. AT&T wants to capitalize on the security market by offering new services and capabilities in a market that is highly fragmented and ripe for disruption. Only 20% of U.S. homes have a home security service, and only 1% of U.S. homes have a home automation service. This provides AT&T with a huge opportunity to grow its Digital Life portfolio to drive growth in connections and revenue. AT&T’s Digital Life covers 59 markets and will continue to expand across its entire footprint over the next two years. TBR believes this product line will be a successful new revenue source over the next six years as AT&T’s early innovative solutions help it grab a share of the market.

Connected Car

AT&T believes its connected car initiative will be a key growth area for the company over the next five years. The operator hopes to be a leader in this market by 2016 and incorporate its Digital Life solutions into the connected car so the entire ecosystem is connected on the same network. AT&T is already a leader in this space, with many major car manufacturers signed as connected car partners. Although the connected car market will not emerge as a major growth driver until at least 2016, AT&T is progressively investing in this vertical and expanding its partnerships so it can quickly monetize the service ahead of the competition in the future. TBR believes the connected car segment will be a major long-term growth opportunity for AT&T, as AT&T is positioned to capitalize on the entertainment and social aspects of the future connected car.

Customer Experience

AT&T is targeting customer experience to drive long-term growth for the company. The operator won the J.D. Power award for the 2013 customer satisfaction survey, surpassing Verizon for the first time. AT&T will continue to enhance and improve its customer service initiatives by creating retail stores of the future and by extensively training its retail staff. This includes removing PCs from the stores and replacing them with tablets. AT&T used to trail in customer satisfaction due to dropped call issues but has worked its way up to the top by focusing on personalizing the retail experience. This will help boost subscriber retention and customer loyalty over the next six years.


In addition to growing its wireless business, AT&T is also targeting growth in its wireline segment through its fiber and U-verse businesses. The wireline portion of Project VIP is expanding AT&T’s fiber network to one million homes and growing the U-verse footprint to 57 million POPs. AT&T showcased the latest U-verse IPTV and IPBB features at the conference in Atlanta. Despite competition from cable operators and Verizon FiOS, AT&T is confident it will continue to grow its U-verse business over the next six years. The U-verse segment reached $12 billion in revenue in its first seven years due to AT&T’s innovative features that differentiate the service from other traditional cable providers. AT&T continues to make headwinds; it launched its U-verse GigaPower service, which offers the fastest speeds on the market (300Mbps), in Austin, Texas. Innovations like this will result in rapid growth for the U-verse business over the next six years. The GigaPower service will expand to new markets in 2014 and will bring with it the fastest IPBB speeds available on the market.

(c) TBR