In-flight Wi-Fi provider Gogo's stock took a drubbing after AT&T yesterday announced plans for a new air-to-ground LTE service that will surely compete against Gogo, at least in the continental U.S.
Gogo's stock plummeted by as much as 18.8% overnight to $14.92 before the Nasdaq market opened on Tuesday. The stock then recovered slightly to $15.20 at Tuesday's opening, then fell back to $14.21 at 10:32 a.m. ET, a 22.68% decline from Monday.
AT&T didn't offer many technical details on how it plans to build its network by the end of 2015, but said in a statement that it "sees an opportunity to deliver an innovative and high-performing in-flight connectivity and entertainment service, and will build on existing relationships within the aviation industry to deliver a better customer experience than what is available from others today."
While AT&T called its proposed network "innovative" it also said it doesn't expect additional capital expenditures for the initiative to be material.
AT&T didn't describe how the network will work and how much it will rely upon the terrestrial LTE network it has rolled out across the U.S.
Jack Gold, an analyst at J. Gold Associates, predicted that AT&T won't likely rely on its existing LTE network for the air-to-ground capability.
"To do this correctly, as Gogo and others have done, it requires specific base stations on the ground that are geared towards wide-area coverage for the airplanes and a dedicated frequency for the effort that doesn't directly interfere with terrestrial LTE," Gold said. AT&T said it already has the spectrum it needs for the new service, but didn't elaborate.
Gold also said AT&T won't need to make massive expenditures — the biggest cost will probably come from outfitting and retrofitting airplanes.
It has cost up to $1 million per plane for Gogo's service, Gold said.
Gogo is now rolled out to 2,000 planes flown by Delta Air Lines, American Airlines, Virgin America, United and US Airways, among others, as well as more than 6,000 business aircraft, according to Gogo's Web site. Gogo first debuted on commercial aircraft in 2008 and is the global leader in inflight connectivity.
In a statement, a spokesman for Gogo said AT&T's announcement validates the "great business that Gogo has created." He emphasized that to compete in the in-flight wireless business, a company needs to be global, which is a focus of Gogo.
Gogo is also deploying two new technologies — GTO (Ground to Orbit) and 2Ku (which stands for two Ku antennas) that bring a wireless signal to each plane that is faster than 70 Mbps, and will increase to 100 Mbps as newer satellite technologies are rolled out, the spokesman said.
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