By Sam Boughedda
Via a fund managed by its Diversified Infrastructure business, BlackRock (NYSE:BLK) and AT&T (NYSE:T) have signed a deal to form a joint venture to operate a commercial fiber platform, the companies announced Friday.
The newly formed joint venture, Gigapower, LLC, is expected to provide a best-in-class fiber network to internet service providers and other businesses across the U.S.
AT&T said Gigapower will serve customers outside of its traditional 21-state wireline service footprint.
Following the announcement, Goldman Sachs analysts told investors in a note that the deal could allow AT&T to purchase wholesale fiber access from the JV to sell AT&T branded fiber-to-the-home services in these markets, with an emphasis on selling fiber/mobile service bundles.
"We do not see this news as surprising as recent media reports (Bloomberg, 10/19) indicated that AT&T was evaluating an out-of-region fiber JV, and management had discussed the merits of potentially expanding its investment in fiber on its 3Q22 call," wrote analysts.
They added: "Our initial view is that this is a moderate investment, given its current capex budget of $24 billion, in a new type of operating model for AT&T, which has historically owned or controlled its communications assets."
Goldman Sachs doesn't expect the JV to materially impact AT&T's financials over the near term.
"We also see it as a relatively low risk approach to expanding AT&T's wireline offerings out of region, where it lacks many of the advantages it has in-region (operating teams, access to rights-of-way, etc.) and may not have as strong of a brand identity as a wireless-only provider," analysts wrote.