Friday, December 23, 2011

AT&T Growth Plans Pressured by Verizon Spectrum Deals

With its bid for T-Mobile officially over, AT&T Relevant Products/Services faces a spectrum crunch exacerbated by the slowness of regulators to approve its earlier spectrum deal with Qualcomm, even as the wireless Relevant Products/Services carrier is forced to part with advanced wireless solutions spectrum.

AT&T's loss of AWS spectrum is a break-up provision in the merger contract it signed with T-Mobile's parent company, Deutsche Telekom, last March. T-Mobile's AWS spectrum windfall, courtesy of AT&T, will provide coverage in 128 U.S. cellular markets, including Los Angeles, Atlanta, Baltimore, Boston, Dallas, Denver, Houston, Phoenix, San Diego, San Francisco, and Seattle.

Rival Verizon Wireless has already made several moves to take advantage of AT&T's AWS spectrum loss. Cox Communications said last Friday that it has agreed to sell Verizon its 20 megahertz AWS spectrum licenses covering 28 million points of presence (PoP) in exchange for $315 million.

"These agreements provide Cox customers with key enablers to mobility Relevant Products/Services, such as access Relevant Products/Services to Verizon Wireless' 4G Relevant Products/Services LTE network Relevant Products/Services and iconic wireless devices," said Cox Communications President Pat Esser.

Though AT&T is facing a spectrum crunch, "it doesn't strike me that ATT will capitulate to Verizon Wireless," said Lisa Pierce, Gartner Relevant Products/Services's managing vice president of unified Relevant Products/Services communications and network services.

"The loss of T-Mobile will spur ATT's LTE-related capital expenditure spending -- to rapidly implement LTE, LTE-Advanced and VoLTE -- especially on the 700 megahertz band," Pierce said in an e-mail Thursday. "This likely shift is welcome news to ATT's key network suppliers."

A Full LTE Blitz

AT&T's cash reserves will take a hit when AT&T posts a pretax accounting charge of $4 billion at the end of the fourth quarter to reflect the T-Mobile deal's break-up considerations. Still, AT&T had over $10 billion cash on hand at the end of the third quarter of 2011.

"Our strong cash flow gives us the flexibility to invest in our business Relevant Products/Services, to retire debt and to continue to return substantial value to shareholders," AT&T CEO Randall Stephenson told investors last October. (continued...)

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