AT&T ( T - Get Report) is throwing down $1 billion to bolster its network capacity during 2009, as the firm attempts to combat the tough economy by targeting business users. The telecom giant, which made a similar investment in 2008, announced plans to beef up its hosting and content distribution story Monday. "The investment adds global capacity and connectivity and improves performance," Joe Lueckenhoff, AT&T's senior vice president of product management, told TheStreet.com, explaining that more business users are looking for on-demand applications. AT&T, which saw revenue from its business-based IP services grow 10.5% in the fourth quarter, will use a chunk of the $1 billion to bolster hosting and content distribution, both in North America and other parts of the world. This includes increased data center hosting capacity in Atlanta, Annapolis and the New York/New Jersey metropolitan area as well as in Hong Kong, Tokyo and the U.K. AT&T is also focusing its attention on delivering managed applications such as SAP ( SAP - Get Report) and Oracle ( ORCL - Get Report). "Companies want network-driven applications to compete in this environment," says Lueckenhoff. "We see ongoing growth in this space, even in light of what is going on in the overall economy." With the firm's consumer revenue hit by weakening demand for traditional voice services, AT&T is clearly searching for new revenue streams from business users. As a result, AT&T is widening its virtual private network (VPN) extension services from 101 to 149 countries, strengthening its network operations partnership with IBM, as well as bolstering its mobile services.
"It's things like external access gateways to third-party providers that might want to access our network for things like location-based services," explains Lueckenhoff. The firm's wireless business and the popularity of Apple's ( AAPL - Get Report) iPhone helped drive AT&T's fourth-quarter revenue growth, and the company forecast low single-digit revenue growth during 2009. Like its rival Verizon ( VZ), AT&T is seen as an attractive stock with plenty of growth potential, although the firm's $1 billion investment did little for its share price Monday. The company's stock slipped 19 cents, or 0.78%, to $24.90, as the Dow fell 2.21%. AT&T's Lueckenhoff told TheStreet.com that the network upgrade was factored into the firm's 2009 guidance, and believes the investment will reap long-term benefits, not just for business users. "I can't predict the future, but this capacity will be useful for any type of customer at any point
in time," he says. "IP data networks can work for things like content distribution, hosting, and video." The telecom bellwether recently reported a 2.4% year-over-year rise in its fourth-quarter revenue, although its profit fell more than 23% over the same period thanks to iPhone 3G subsidies, storm-related costs and unfavorable foreign exchange rates.