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AT&T to pay $1.93bn for Qualcomm spectrum

AT&T Inc. will pay $1.93 billion for a swath of spectrum licenses from Qualcomm Inc. as AT&T looks to bolster its fourth-generation service while Qualcomm shutters its FLO TV service.

The deal frees up valuable wireless spectrum for AT&T to deploy as part of its fourth-generation network, while allowing wireless-chip maker Qualcomm to stop investment in its struggling mobile broadcast video service. While Qualcomm has been benefiting from its exposure to smartphones, the FLO TV business has been disappointing and has weighed on results.

"FLO TV has been a thorn in investors' sides for a long time," Bernstein analyst Stacy Rasgon said. He added that Qualcomm is making a good return on its investment of about $700 million for the spectrum."I'm glad to see them get out of it."

Qualcomm shares, up 6.6% this year, slipped 14 cents to $49.32 in recent trading, while AT&T, up 4.1% this year, lost 4 cents to $29.17.

Qualcomm in October said it would suspend sales of devices for FLO TV--which delivers video to cellphones using a broadcast network--but that customers would continue to receive programming into the spring.

The company then said during its fourth-quarter results in November that it would be exiting the business and that it was considering several options for FLO TV, including setting up a joint venture or selling the spectrum licenses.

Qualcomm disclosed Monday that FLO TV will be shut down in March. The company had already disclosed restructuring charges of up to an estimated $175 million related to the October announcement, and the figure is expected to grow.

Qualcomm spokeswoman Emily Kilpatrick said the company doesn't have more information about restructuring charges and that it hasn't provided additional guidance details at this time.

"We will provide further details as we progress through the transaction as appropriate," she said.

AT&T is buying spectrum licenses in the lower 700MHz frequency band. It plans to deploy the spectrum as part of longer-term plans for its fourth-generation network, once "compatible handsets and network equipment are developed." The companies expect the sale to close in the second half of 2011.

The price AT&T paid for the spectrum is similar to or lower than comparable spectrum prices, AT&T spokeswoman McCall Butler said.

Wireless carriers more and more are putting their irons in the 4G fire as they continue to try to lure customers away from one another by racing to put out the latest in technology. Fourth-generation wireless technology is significantly faster than 3G, which is mostly the standard for smartphones.

The move is also forward-looking for AT&T because of the major-city concentration of the spectrum. AT&T has been the subject of much complaining about its service in major cities for the wildly popular Apple Inc. iPhone, which is heavy on data usage. Plans for a 4G iPhone haven't been announced.

The spectrum covers over 300 million people in areas where capacity is needed, Standard & Poor's Equity analyst Todd Rosenbluth said.

"With wireless data a key driver for [AT&T's] prospects, we think this is an appropriate use of cash even as [the company] just announced a planned dividend hike and share buyback plan," he noted.

Источник: Total Telecom

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