Entering Europe, AT&T will find it much more difficult to build a network than what it has seen in the United States. Along with the European Union's guidelines, the member countries also have their own rules. Europe as a whole is much more regulated than the United States, which limits the fees and revenue carriers can make from charging for network usage and roaming charges.
Not only is the European economy growing more slowly than in the United States, but unemployment is also much higher. On top of this, "pricing competition" makes it more challenging to squeak out profits.
The jury is still out on how much of a profit AT&T can make as compared to here in the states. Consumers in Europe pay much less for their mobile usage. (A recent Bloomberg article suggested the average European paid $38 per month while the U.S. subscriber pays $69.) Even though the higher amount in the United States includes the 4G coverage, how much are the citizens of the European Union willing to pay for their 4G service?
I highly doubt they will pay what we are paying here in the United States. I do not believe operating costs in Europe are going to be almost half what they are in the United States either. From an investor's viewpoint, it looks to me like AT&T is going to have a major challenge making a profit in Europe compared to here in the states.I think of AT&T as a stalwart domestic telecom company. As technology has evolved, so has the company. Revenue sources -- such as from landlines -- continue to change, which is why the company is exploring Europe as a market. Buying Vodaphone could bring AT&T new opportunities and new risks. I believe it will be important for investors to stay abreast of AT&T's interest in developing a 4G network in Europe. The company is a strong investment for "income investors" and Europe could be either a boondoggle or a very strong long-term revenue source. At the time of publication the author had no position in any of the stocks mentioned. This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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