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Market Wrap-up for May 19 - AT&T Makes a Big Move (T)

Jared Cummans May 19, 2015


AT&T (T ) announced a major deal yesterday that sent its stock price soaring more than 1.6% for the day.


AT&T and the Auto Industry


The deal involved eight different automakers, as AT&T will be equipping new vehicles with internet access as well as offering free and paid content. Among the eight automakers were big names like General Motors (GM ), Ford (F ), and Audi.

The exclusive and paid content will come in the form of videos and games that can be streamed onto personal devices in the car. The ultimate goal is to help drive revenues (through increased data consumption across its network) for the telecom giant. Reuters noted that knowing the make and model of the vehicles in which its services will be available will also help AT&T focus on and target specific content for users, hopefully translating into a more interactive experience.

GM has already begun testing the content through its OnStar service, which is best known for helping connect drivers to operators in case of an emergency.

The move from the bellwether telecom firm shows something of a new trend for the industry.


Telecom Battles for Revenues


Last week, Verizon (VZ ) announced that it will be buying AOL for $4.4 billion as it tries to push further into targeted advertising and mobile content. Now, it seems that the release of AT&T’s news was partly in an effort to assure shareholders that it too is working to innovate alongside its peers.

Both AT&T and Verizon have been under the gun in recent years. Smaller competitors, such as T-Mobile and Sprint, have aimed to undercut their larger competitors and have had relative success with gaining market share. That trend became concerning for investors in T and VZ, likely leading the two companies to find new ways to innovate outside of providing service for mobile devices.

As far as offering cellular and data services, the growth outlook for companies like AT&T and Verizon are relatively bleak, as most of the market is already hooked into the system, so to speak. These giants know that they need to look for growth beyond their bread and butter services and innovate to remain competitive.


The Bottom Line


Investors and consumers alike will want to keep an eye on the new service from AT&T and how it’s integrated into the auto industry. Investors must also keep an eye on T and VZ as they look for these companies to continue to push the envelope and find new avenues of growth.

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