AT&T Buys Spectrum Licenses for $2.5B

AP
AT&T Buys Spectrum Licenses for $2.5B
Tuesday October 9, 7:12 am ET
AT&T Buys Spectrum Licenses Across the United States for $2.5 Billion From Aloha Partners


SAN ANTONIO (AP) -- AT&T Inc. said Tuesday it agreed to buy spectrum licenses from Aloha Partners LP for about $2.5 billion, expanding the telecommunication provider's ability to deliver wireless voice, data and video services.
The deal adds 12 megahertz of spectrum at the 700 MHz frequency, covering 196 million people in 281 markets, the company said. It also boosts AT&T's presence in 72 of the top 100 metropolitan areas.

AT&T, the exclusive carrier for Apple Inc.'s iPhone, has been aggressively expanding its wireless network in recent years in the face of customer complaints about service and availability.

The company expects to close the purchase in six to nine months, pending regulatory approval.

 

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Investor's Business Daily
AT&T Buys Wireless Airspace In Pre-Auction Maneuvering
Tuesday October 9, 7:00 pm ET
Reinhardt Krause


In a move that could alter the dynamics of a hotly anticipated wireless auction next year, AT&T said Tuesday it will pay $2.5 billion to buy spectrum from Aloha Partners.
Aloha is the largest holder of licenses in the 700 megahertz frequency band, the same general airwaves that the Federal Communications Commission plans to sell in late January.


The deal removes Aloha as a probable bidder in the auction and blocks AT&T's (NYSE:T - News) rivals from partnering with the privately-held firm. AT&T also heads into the auction with a big chunk of 700 MHz airwaves already in its grasp.

"It's a big chessboard, a lot of big companies are playing on it, and any big move by one player affects all the others," said Blair Levin, an analyst at Stifel Nicolaus. "AT&T now has a very good 700 MHz spectrum footprint. And, it will start off the auction in the best overall spectrum position of anybody in the U.S."

The FCC auction is seen as a big event, because the 700 MHz airwaves are expected to be used for wireless broadband services -- either by incumbent phone companies or, potentially, new entrants such as Google (NasdaqGS:GOOG - News).

AT&T can try to buy more spectrum to complement Aloha's licenses or stay on the sidelines, happy with what it has, analysts say. AT&T says it expects to close the Aloha deal in six to nine months, but won't say what it plans to do in the meantime.

"We can't comment on whether or not we plan to participate in the auction," said AT&T spokesperson Michael Coe.

Verizon Communications (NYSE:VZ - News), Google, cable TV companies and other potential auction bidders, meanwhile, may rethink their bidding strategies in light of the AT&T-Aloha deal.

By federal agency estimates, the 700 MHz auction could raise between $10 billion and $15 billion for the U.S. Treasury. Television broadcasters use the airspace now, but will give it up in a mandated transition to digital signals that use different frequencies.

Applications to take part in the auction are due at the FCC in early December.

With the Aloha deal, AT&T is restocking its spectrum licenses.

To gain regulatory approval for acquiring BellSouth in late 2006, AT&T agreed to divest radio spectrum in the 2.5 gigahertz band. Clearwire (NasdaqGS:CLWR - News) purchased some of it for about $300 million in February.

Aloha's investors include Charles Townsend, former chief of Providence Journal Communications, and cable TV industry pioneer Amos Hostetter, who co-founded Continental Cablevision in 1963.

Aloha acquired its 700 MHz radio spectrum in 2001 and 2003 in earlier federal auctions. Aloha has about 12 megahertz of spectrum covering 60% of the U.S.

Aloha has been testing beaming TV services to mobile phones using its 700 MHz spectrum. Its HiWire service is running a mobile TV trial with Deutsche Telekom's (NYSET - News) T-Mobile USA unit in Las Vegas.

But Qualcomm (NasdaqGS:QCOM - News) has jumped ahead of Aloha and others in commercializing mobile TV services, analysts say.

Qualcomm has signed up Verizon Wireless and AT&T as customers for its MediaFlo TV service.

"We're as enthusiastic about the mobile TV market as we've ever been," said Townsend, the Aloha investor. "But, as we all know, all companies have a price. This seemed like the right deal at this time for us."

He wouldn't say whether Aloha had talks with other parties interested in buying the airwaves.

AT&T's Aloha deal is the latest example of pre-auction maneuvering.

In September, MetroPCS Communications (NYSECS - News) launched a takeover bid for Leap Wireless International (NasdaqGS:LEAP - News), in part because of the auction's timing, some analysts say.

Leap has rejected MetroPCS' offer. But some analysts believe the two companies could still hammer out a deal before the auction takes place.

If combined, MetroPCS and Leap would become the nation's sixth-largest wireless firm, with 6.2 million customers. It would hold spectrum licenses covering most of the top 200 U.S. markets.

Without a merger, one or both companies might need to buy spectrum in the auction, analysts say.