Raymond James sees ‘solid benefits’ to AT&T from BlackRock venture

Raymond James analyst Frank Louthan keeps a Strong Buy rating on AT&T (T) after the company announced a joint venture with BlackRock (BLK) to develop fiber-to-the-home outside its 21-state footprint. Financial terms were not disclosed, but AT&T twill likely contribute its existing fiber assets in these markets as a base case to build on, with the Gigapower team and BlackRock funds handling the rest of the way to the customer, Louthan tells investors in a research note. The analyst says this is a much smaller initial step than he would have anticipated, with a target of "only" 1.5M locations to be passed. He estimates this will cost about $1,000 per passing and result in $3,000 or less per subscriber, assuming low 30% penetration. However, the sell-through from wireless and churn reduction from bundling fiber-based broadband has "solid benefits" to AT&T beyond the actual subs and joint venture returns, Louthan contends.