AT&T's Project VIP to Invest $14 Billion in 3 Years in Key Areas

AT&T, with the introduction of Project VIP, plans to spend $14 billion on wireless and wireline initiatives that will grow its business, revenue and reach.

AT&T plans to invest $14 billion over the next three years to significantly expand and enhance its wireless and wireline IP broadband networks and to meet customer demands for quick Internet access and mobile, cloud and application-based services. The investment came with the unveiling of Project Velocity IP (VIP), AT&T's agenda for growing revenue from existing and forthcoming products and services.

AT&T shared its plan with analysts Nov. 7 in New York City, as a second major storm in two weeks descended on the region and some grogginess remained from a late night of presidential election news. It was after 1:30 a.m. on the East Coast when President Obama took the stage to acknowledge his victory.

AT&T CEO Randall Stephenson, in a bright red tie, also acknowledged the news.

"The issue that will transcend the election is our nation's financial situation," Stephenson told the audience. "We're at a time of urgency where Congress needs to act and the president needs to step up and lead. ... If businesses aren't investing, they're not hiring."

He added that AT&T has "invested more capital into the U.S. economy than any other public company" and that in the "very dynamic" wireless industry, the United States "has undoubtedly led the world, and AT&T has led the U.S."

Stephenson and a panel of his colleagues then laid out AT&T's strategies and expectations for the next few years, which include:

  • expanding AT&T's 4G Long Term Evolution (LTE) network to cover 300 million people by the end of 2014, up from its original goal of 250 million people by the end of 2013;
  • reaching 1 million additional business customer locations with fiber, covering 50 percent of multi-tenant office buildings in its wireline service area by the end of 2015; and
  • extending wireline service and high-speed IP Internet access via IP wireless and/or 4G LTE to 99 percent of its customer locations.

"This is a major commitment to invest in 21st century communications infrastructure for the United States and bring high-speed Internet connectivity—4G LTE mobile and wireline IP broadband—to millions more Americans," Stephenson said in prepared remarks.

He added that AT&T has the opportunity to improve its revenue growth and cost structure for years to come and, with Project VIP, to expand AT&T's potential in the key growth areas of wireless data, U-verse and strategic business services.

Project VIP consists of several wireless and wireline initiatives.

One such initiative, focused on mobile Internet growth, includes the expansion of AT&T's LTE network, its use of small cell technologies to increase the density and quality of its network, and growing its spectrum holdings, which it has built on with more than 40 deals already this year.

For some time, AT&T has been pursuing a plan to patch together Wireless Communication Services (WCS) spectrum for mobile broadband use, and it's now awaiting the approval of the Federal Communication Commission (FCC) on some of it—while also planning to keep working on the FCC to make more spectrum available.

"Assuming approvals on spectrum we acquired this year," said John Stankey, AT&T's chief strategy officer, "we have an impressive spectrum position relative to our peers."

A second initiative focuses on the expansion of AT&T's wireline IP network and U-verse technology and bringing speed upgrades to U-verse customers.

A third initiative looks at new growth areas for the carrier. These include AT&T's Isis "mobile wallet" venture with T-Mobile and Verizon Wireless, an IP-based home security and automation service, scheduled to launch in 2013, that will enable customers to manage their home from a smartphone, tablet or PC, and the growing area of the connected car. By 2016, more than half of new vehicles are expected to be wirelessly connected, enabling drivers to do things like send voice-driven emails, take calls, check traffic ahead and even alert the house when the car is pulling into the driveway, so that appropriate lighting or thermostat changes can be made. AT&T says it already has deals with Ford, Nissan and BMW.

A final area considers AT&T's expectations for growth during the period. It expects wireless, wireline data and managed IT services to comprise 90 percent of its total revenue by 2016, up from 80 percent currently.

"It's going to be raining tablets. There's going to be a tremendous growth opportunity for us to monetize that data," said Ralph de la Vega, CEO of AT&T's Mobility unit.

Regarding AT&T's upcoming home security service, de la Vega added that "80 percent of the country currently isn't covered, because there hasn't been an affordable solution. I see a huge growth opportunity, on top of huge data growth."

Closing the presentation, Stephenson again returned to the political situation, pointing to the "fiscal cliff" coming in January. The term has come to be used to address a combination of automatic tax increases and spending cuts that will go into effect in January, unless a budget deal is reached.

Stephenson said that he hoped the "folks in government" realized that the situation was giving businesses pause and preventing them from investing.

"The No. 1 issue to getting businesses back to growth is getting the economy back to growth," he said. That said, he added, "We're not sitting around waiting."

Follow Michelle Maisto on Twitter.