AT&T, China Telecom Hook Up
AT&T (NYSE:T - News) is now set to venture into the Chinese telecom market. The company has joined hands with one of China’s largest telecom companies, China Telecom Corp Ltd. to expand both companies’ market presence by offering cross-country corporate telecommunication services like telepresence, managed hosting, cloud-based services, network integration services, enterprise mobility and other technological solutions to multinational companies.
The financials of the deal were not disclosed but the deal terms entail AT&T to expand its Internet and corporate services into the Chinese market. In turn, China Telecom will avail access to AT&T‘s superior network and cater its corporate customers in the U.S. Further, both these companies remain keen on jointly exploring new markets and provide mutual support to strike a long-term association.
AT&T made its foray into the Chinese telecom market in 2000 and formed a joint venture called, Shanghai Symphony Telecommunications Co, partnering China Telecom and Shanghai Information Investment Co.
Over the past decade, China’s telecom market has grown leaps and bounds with a yearly turnover of approximately $128 billion in 2010. Over the coming years, the telecom industry in China is expected remain a major contributor to the domestic economy with key drivers like mobile data and broadband Internet services.
Given more than 1 billion telecom users in China and industry growth rate exceeding GDP levels, AT&T is once again set to tap one of the biggest emerging markets riding ahead of its peers, Sprint (NYSE:S - News) and Verizon (NYSE:VZ - News). Further, we believe AT&T’s presence in China would also open doors for the company in other big Asian markets like India and South East Asia.
In the fiercely competitive U.S. market scenario and the T-Mobile merger crises, we believe AT&T’s strategic decision to move east for a greener pasture bodes well for its long-term growth. Alongside, the company has also collaborated to share its network with the Mexican telecom giant America Movil (NYSE:AMX - News) to enhance their respective networks in key markets throughout the world, including growth regions like Latin America, Asia and the Middle East.
Currently, we maintain our long-term Neutral recommendation on AT&T supported by a Zacks #3 Rank (Hold).
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