Sector Snap: Cellular network companies
NEW YORK (AP) — Shares of cellular network companies got a boost Wednesday after AT&T announced plans to invest $14 billion in its network in hopes of making its broadband offerings more competitive with those provided by cable companies.
Like other phone companies, AT&T is having a hard time competing with cable broadband in much of its service area, because regular "DSL" broadband is now much slower than what cable companies offer.
The $14 billion AT&T plans to spend over the next three years will expand both the company's LTE wireless coverage, as well as its traditional wired phone service.
Data speeds on AT&T's "4G LTE" are often faster than DSL and can be comparable to cable, but since AT&T has limited space on the airwaves, it imposes caps on monthly data usage that are much lower than those for wired broadband. That means customers who replace wired broadband with wireless will find it expensive to use data-intensive services like TV-quality streaming video.
Citi analyst Kevin Dennean said the spending could be a big boost for companies that will supply the optical components, routers and other equipment needed to expand the network. He pointed to Ciena Corp., Juniper Networks Inc., Cisco Systems Inc. and Adtran Inc. as some of the top potential beneficiaries.
Optical component suppliers JDS Uniphase Corp., Finisar Corp. and Oclaro Inc. could also benefit from the spending increase, he said.
Dennean added that other telecom companies could also chose to follow AT&T's lead, resulting in even more sales for the companies.
Dallas-based AT&T is the country's largest wired phone company, serving 33 million traditional phone lines in 22 states. It's the second-largest wireless carrier, after Verizon Wireless.
Here's how the cellular network companies were trading Wednesday afternoon, as the overall market fell:
— Ciena rose $1.15, or 9 percent, to $14.33.
— JDS Uniphase added 62 cents, or 6 percent, to $11.25.
— Adtran rose 51 cents, or 3 percent, to $18.03.
— Juniper added 29 cents to $17.83.
— Finisar rose 16 cents to $12.35.
— Cisco fell 25 cents to $17.23.
— Oclaro fell 6 cents, or 4 percent, to $1.55.