Analyst: AT&T needs to spend $5 billion to catch up to Verizon's 3G

AT&T would need to spend about $5 billion on its wireless network to catch up with the coverage offered by Verizon Wireless, a financial research firm said Tuesday.

The public's perception of AT&T's network is poor and declining, apparently because of real shortcomings when compared with Verizon Wireless and Sprint Nextel, said Gerard Hallaren, director of research at TownHall Investment Research. The company hosted a conference call about AT&T for investors in conjunction with WJB Capital Group. TownHall announced it has reduced its rating of AT&T from "Favorable" to "Neutral." The second-largest U.S. mobile operator has been buoyed by its exclusive deal to sell the popular Apple iPhone -- an edge that is expected to disappear soon -- but has been shortchanging its wireless infrastructure at the expense of its wired network, Hallaren said. "It has a choice to spend or suffer," he said. According to TownHall, AT&T's capital expenditures on its wireless network from 2006 through September 2009 totaled about $21.6 billion, compared with $25.4 billion for Verizon and $16 billion for Sprint (including Sprint's investments in WiMax operator Clearwire). Over that time, Verizon has spent far more per subscriber: $353, compared with $308 for AT&T, Hallaren said. Even Sprint has outspent AT&T per subscriber, laying out $310 for network capital expenditure. That investment shortfall has been the major cause of AT&T's poor network performance, which has been reflected in tests by Consumer Reports and PC World, Hallaren said. Nine months ago, when TownHall first examined the issue, AT&T itself didn't understand how bad the situation was, he said. Top management now seems to understand the issue, though it's not certain AT&T will actually make the necessary investments, he said.