December 20, 2010 2:52 pm

AT&T to buy Qualcomm’s spectrum for $1.93bn

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AT&T, the US telecoms group, is paying Qualcomm $1.93bn for wireless spectrum that it will use to support the roll-out of its nationwide 4G mobile network beginning next year.

Qualcomm had sought a buyer for the spectrum, which is in the highly valued 700 megahertz spectrum band, following its decision to fold its struggling FloTV service which has been broadcasting live TV to select mobile handsets. The San Diego-based mobile chipmaker reportedly paid about $683m for the spectrum, which it acquired between 2003 and 2008. It has said that it was looking for new options for the spectrum after announcing that it expects to shut down FloTV in March 2011.

Analysts said the price also looked fair from AT&T’s perspective. “The Qualcomm/AT&T transaction comes out to about $0.86/MHz/POP [a benchmark measure of spectrum pricing] which is an attractive price given the quality of the spectrum,” said Craig Moffett of Bernstein Research.

Mr Moffett said the price AT&T is paying is meaningfully below the $1.10/MHz/POP prices paid in the auction of similar 700Mhz spectrum by the US Federal Communications Commission just a couple of years ago. “That’s a troubling signal for some of the more aggressive valuations that are floating around for what are lower quality spectrum bands than this,” he said.

AT&T is preparing to roll-out a next generation mobile broadband network based on a technology called LTE (Long Term Evolution). The company said the spectrum it is acquiring, which covers about 300m people, will be used to boost the capacity of the new network.

“The move will bolster AT&T’s ability to provide an advanced 4G mobile broadband experience for its customers in the years ahead,” AT&T said. Wireless broadband networks based on LTE are expected to offer data download speeds more than 10 times faster than the current third generation, or 3G, technology. All four leading US mobile network operators are racing to deploy the high-speed broadband mobile networks that are necessary to support the next generation of smartphones and other data-hungry mobile devices and services such as mobile video-conferencing.

This month Verizon Wireless, the US mobile network operator jointly owned by Verizon Communications and Britain’s Vodafone, launched its next-generation LTE network in 39 US markets including New York.

AT&T, which is the exclusinve carrier for Apple’s iPhone in the US, has been criticised for the quality of its existing 3G wireless network in some heavily populated markets such as New York. It has been under pressure to improve its offering amid speculation that Apple could announce a LTE-version of its popular iPhone 4 early next year.

Barclays Capital acted as exclusive financial advisor to Qualcomm on the transaction.

Shares of AT&T were trading up 22 cents at $29.43 a share in early trading while Qualcomm’s shares were up 63 cents or 1 per cent at $49.75.

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