AT&T to Invest $14 Billion in Networks, Lifts Dividend

AT&T Inc. (T), the top U.S. telephone company, said it will invest $14 billion over three years to improve the networks that deliver wireless communications, high- speed Internet access and television services.

The company is devoting $8 billion to the network that handles mobile data and calling and $6 billion to wireline equipment, Dallas-based AT&T said today in a statement. It also forecast that per-share earnings will rise at a mid-single digit percentage rate in the coming three years, while lifting its quarterly dividend by 2.3 percent to 45 cents a share.

Chief Executive Officer Randall Stephenson is taking steps to help AT&T fend off phone competitors led by Verizon Communications Inc. (VZ) as well as cable providers such as Comcast Corp. (CMCSA) The upgrades will help the company reach a wider customer base, bringing the potential market for U-verse TV, Internet and calling packages to 33 million locations.

“In today’s world, if you don’t have broadband, both wireless and wireline, the competition will tear you to pieces,” said Roger Entner, an analyst at Recon Analytics LLC in Dedham, Massachusetts. “This is clearly designed to compete toe-to-toe with Verizon and the cable companies. A company that stops investing in the network is a company that starts dying.”

AT&T said its fourth-generation wireless network, which uses long-term evolution technology, will cover 300 million people by the end of 2014. The company expects its fiber network to reach an additional 1 million business customers by the end of 2015.

`Substantial Value'

“We have the opportunity to improve AT&T’s revenue growth and cost structure for years to come and create substantial value for share owners,” Stephenson said in the statement.

AT&T fell 3.3 percent to $33.63 at the close in New York. The stock has advanced 11 percent this year.

“AT&T’s announcement of billions of dollars in new investment in wired and wireless broadband networks is proof positive that the climate for investment and innovation in the U.S. communications sector is healthy,” said U.S. Federal Communications Commission Chairman Julius Genachowski in a statement.

Total capital spending will be about $22 billion for each of the next three years, AT&T said. That topped the estimate of as much as $20 billion by John Hodulik, an analyst at UBS AG in New York. The spending will help boost sales growth through 2015 while holding back earnings expansion, Hodulik, who has a neutral rating on the shares, wrote in a note to clients today.

To contact the reporter on this story: Ryan Faughnder in New York at rfaughnder@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net