AT&T is abandoning its plans to bring high-speed Internet access via Wi-Fi to commercial flights, leaving Gogo the sole dominant player in the burgeoning in-flight connectivity industry.
The news first broke out over airline industry blog Runway Girl Network, which obtained a copy of AT&T's statement announcing that it is no longer working on an air-to-ground network that will provide airlines the option to connect their passengers to the Internet via AT&T's 4G LTE network. Instead, the company will be refocusing its efforts on "transformative investments," including its expansion into the international market.
AT&T is currently working to persuade antitrust regulators to approve its pending bid to acquire satellite provider DirecTV for $48.5 billion. It has just announced its $2.5 billion acquisition of Mexican wireless carrier Grupo Iusacell on Friday. The decision to sacrifice in-flight Wi-Fi comes as AT&T cuts back on its 2015 capital expenditures by 14 percent to $18 billion.
"As AT&T explores opportunities for future growth and diversification, expanding our international presence has remained an area of interest," says AT&T spokesperson Fletcher Cook. "After a thorough review of our investment portfolio, the company decided to no longer pursue entry into the Inflight Connectivity industry. We are focusing our capital on transformative investments, such as international and video."
AT&T announced in April that it has partnered with Honeywell Industries' aerospace division to construct the infrastructure that will bring 4G LTE Internet to commercial flights by late 2015. At that time, AT&T chief strategy officer John Stankey said the partnership will "transform connectivity in the aviation industry" in an announcement that caused Gogo's shares to tank.
The Itasca, Illinois-based firm, which continues to be the world leader in inflight connectivity, offers 3G-based Wi-Fi that many users have complained about being too slow, rendering it useless for most Internet activities. In March, Gogo aggravated many of its customers, who are already displeased with the snail-like pace of its service, by increasing its prices.
Following news of AT&T's scraping off its in-flight Wi-Fi plans, Gogo's shares, which are down 27 percent this year, shot up by 10.58 percent to $18.40. AT&T shares also rose slightly by 0.6 percent to $35.12.
Gogo CEO Michael J. Small declined to comment on AT&T's latest move, but said that the company "looks forward to competing with existing competitors and anyone else who wants to get into the space."
"We firmly believe that we are a leader in this space because we specialize in aviation and we've built a network to service the global aviation market," Small says.
