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AT&T to buy Qualcomm's mobile spectrum for $1.93 billion

December 20, 2010|Reuters

NEW YORK - AT&T Inc plans to buy wireless spectrum from Qualcomm Inc for $1.93 billion and boost its 4G network, aiming to counter criticism over iPhone service quality and a threat from rivals like Verizon Wireless.

AT&T is the sole U.S. carrier for Apple Inc's iPhone, but smaller rivals like Sprint Nextel and Clearwire Corp have been adopting 4G, a new wireless standard that enables better Internet access including video.

It is the sort of wireless bandwidth AT&T desires -- and will get with Monday's deal -- given the strain iPhone has put on its existing network. At times, customers in cities like New York and San Francisco have complained of dropped calls and slow Web connections.

AT&T's move also comes as Verizon Wireless, the venture of Verizon Communications Inc and Vodafone Group, has also adopted 4G service and is widely expected to gain rights to sell the iPhone in 2011.

The 700 megahertz (MHz) airwaves are considered valuable because they travel long distances and can penetrate thick walls. The license covers more than 300 million people in the United States, the companies said in a joint statement.

In 2007, AT&T bought wireless airwave licenses in the 700 MHz frequency band from privately held Aloha Partners LP for about $2.5 billion.

For San Diego-based chipmaker Qualcomm, the sale will mark the end of its FLO TV business, its mobile television service that never took off.

It had said in July that it would examine its strategic options for the business, and announced in October that it was suspending sales. It was trying to sell the spectrum and was in talks with wireless operators including Verizon Wireless.

In recent years Qualcomm spent $683 million on airwaves to build the network. It has never released financials for the service but had estimated when it started constructing the network that it would cost about $800 million to build.

The 700 MHz band was formerly used by U.S. television stations, but the U.S. Congress voted in late 2005 to require stations to vacate the spectrum and move to all-digital broadcasts. TV stations exited the 700 MHz spectrum in 2009.

AT&T and Qualcomm expect the sale to close during the second half of calendar year 2011.

AT&T shares were trading down 20 cents, or 0.7 percent at $29.01 by late morning trade on the New York Stock Exchange. Qualcomm shares were up 26 cents or 0.5 percent at $49.72 on Nasdaq.

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