AT&T Mobility left nothing to chance in its quest for 700 MHz spectrum. The nation’s No. 1 carrier agreed last week to shell out $2.5 billion in cash for 700 MHz licenses from Aloha Partners L.P. in advance of the upcoming Federal Communications Commission’s highly anticipated 700 MHz spectrum auction. The move, which likely signals Aloha’s exit from the mobile broadcast space, underscores AT&T Mobility’s willingness to pay now rather than suffer the uncertainty of an auction.
The deal gives AT&T Mobility 12 megahertz of spectrum covering 196 million people in 281 markets, including the top 10 markets in the United States and 72 of the top 100 markets.
$2.5B bargain
While the spectrum appears to have come with a hefty price tag, the acquisition may be a bargain for AT&T Mobility. Analysts estimate the FCC auction for 700 MHz spectrum will generate bids of at least $1 per megahertz per person covered-roughly what AT&T Mobility paid Aloha Partners. By buying early, AT&T Mobility may have done away with the unpredictability of an auction as it bought a nationwide footprint with a single check. And it may have avoided entering a costly bidding war against heavyweights such as Google Inc. and Verizon Wireless, both of which may participate in the auction.
“The clear implication is that they thought the dollars per megahertz by purchasing from Aloha Partners would be below the dollars per megahertz they would have to pay the FCC early next year,” said Vinod Valloppillil, VP of product marketing for Roundbox Inc., which develops mobile broadcast software for both the MediaFLO and DVB-H standards. “And that spectrum available via Aloha has already been cleared and is contiguous nationwide, while the FCC auctions might result in broken, non-contiguous spectrum chunks across the country.”
More deals to come
AT&T Mobility has been on a spending spree in recent months; earlier this year the operator announced an agreement to acquire rural operator Dobson Communications Corp. for $2.8 billion. Some onlookers believe that spree will continue as AT&T Mobility tries to expand its licenses in the upcoming auction; others believe the carrier will use the Aloha spectrum to negotiate a network-sharing agreement with the winning bidder. And given the company’s cash reserves, AT&T Mobility may continue to accrue licenses via acquisition.
Spokesman Michael Coe said the carrier had yet to decide how to use the spectrum, which is an attractive bandwidth for both two-way communications and one-way multimedia broadcasts. Coe said AT&T Mobility could even follow through with Aloha’s plan to serve as a broadcast wholesaler to other wireless carriers, competing with MediaFLO.
“We’ll use the spectrum either for broadcast mobile or two-way voice and data services, but not both,” according to Coe. “We’ll make that determination based on what’s best for our customers.”
But it’s likely that AT&T is thinking of a longer-term play as it writes the check to Aloha Partners, Valloppillil said. In addition to DVB-H, 700 MHz is particularly well-suited for WiMAX. Or the company could be considering DVB-SH, a hybrid standard that couples a high-power satellite (for outdoor and light indoor coverage) with a terrestrial repeater network (for indoor access in urban areas).
Regardless of the technology, though, the acquisition underscores AT&T Mobility’s effort to move beyond simple cellular service into the broader arena of digital telecommunications, according to Valloppillil.
“What’s tying all this together is AT&T’s video strategy,” the Roundbox executive said. “This is definitely an anchor in the quad play.”
