AT&T's coverage woes could cost billions to remedy - analyst

The shortfalls of AT&T's wireless network can be attributed to the company's lack of investment in infrastructure, said Gerard Hallaren, director of research at TownHall Investment Research in a conference call Tuesday. AT&T would have to spend between $5 billion to $7 billion in order to equal Verizon's current level of investment.

According to Hallaren, AT&T has benefited greatly from its exclusive iPhone deal with Apple, but this exclusivity is to come to an end this year, most likely in May or June. Verizon is expected to be the next to offer the iPhone, followed by T-Mobile and Sprint.

Although AT&T's wireless business is its "absolute engine of profitability," producing 57 percent of its operating income, over 65 percent of its capital spending goes towards wired infrastructure, said Hallaren.

The returns from AT&Ts U-Verse internet/television/telephony service will not justify the investment, according to Hallaren, and its focus on wired infrastructure has been one of the major factors contributing to AT&T's less than stellar wireless network performance.

AT&T and Verizon have been in an increasingly heated battle for customers. A highly publicized legal battle over Verizon's claims of AT&T's lack of 3G coverage was eventually dropped, but spawned a series of commercials with both sides heavily criticizing the other.

Verizon has parodied Apple's "There's an app for that" slogan by comparing its superior coverage 3G coverage map with AT&T, using the tagline "There's a map for that." And AT&T hired actor Luke Wilson to "set the record straight" on AT&T's coverage and point out areas where AT&T beats Verizon, like the ability to make calls and access data on handsets at the same time.