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Summary:

AT&T said Friday afternoon that it bought some of Verizon Wireless’ rural spectrum and assets for $2.35 billion as part of mandated divestitures associated with Verizon’s acquisition of Alltel. Customers will have one year to give up their CDMA-based phones, and AT&T will spend about $400 […]

logo AT&T said Friday afternoon that it bought some of Verizon Wireless’ rural spectrum and assets for $2.35 billion as part of mandated divestitures associated with Verizon’s acquisition of Alltel. Customers will have one year to give up their CDMA-based phones, and AT&T will spend about $400 million over the next two years to transition the networks in the 79 service areas from CDMA to its GSM-based network.

The good news is that the 1.5 million customers who now will have wireless service from AT&T can pick up an iPhone if they choose. The bad news is that AT&T apparently beat out more than 30 bidders, including some private equity firms, to pad its place as a key holder of wireless spectrum. Given that several cable companies interested in building out wireless services were speculated to be potential bidders, I wonder if AT&T was interested in the customer base or more interested in keeping new competitors out of the wireless market?

AT&T also said it agreed to sell five service areas it acquired when it purchased Centennial Communications to Verizon Wireless for $240 million.

  1. This article is way off base. AT&T has almost NO low spectrum band width in most of rural America. In FACT, unlike Verizon they’re without have much low band width spectrum in many urban areas. Consumers can only benefit with greater rural coverage available to more people

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    1. Jesse Kopelman Tuesday, May 12, 2009

      Not true at all. The 800Mhz spectrum was originally allocated in two blocks, A and B. Under rules still mostly in place, no carrier could hold both blocks (this is why Verizon is selling off licenses in these markets). The carrier with the most 800MHz spectrum was indeed Verizon, but the carrier with the second most was Cingular (not Alltel by a long shot). Cingular is the company that became the current AT&T Mobility. You are confusing the defunct AT&T Wireless (acquired by Cingular) with the current AT&T Mobility. Yes there are markets that neither Cingular nor AT&T Wireless served at 800MHz, and these are exactly the markets AT&T Mobility just acquired from Verizon, but they hardly encompass Most of Rural America.

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  2. Stacey Higginbotham Monday, May 11, 2009

    Mike, I’m not sure what is so off base about this. The point is a new entrant like a cable co or a private equity firm didn’t get the assets.

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    1. AT&T acquired only the rural assest and the remaining assets will be re-auctioned again later. So now those vast stretches of America have more potential to be reached by GSM phone users even if by roaming. Alltel was a CDMA carrier like Verizon and they both had the the only effective low-bandwidth spectrum that can reach these areas. Who would win if an underfunded provider obtained these remote assets that require such huge resources w/ such low revenue potential ?? Definitely not the consumers. Besides those other parties will have a chance for much desirable spectrum remaining anyway.

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  3. [...] industry has seen the number of landlines fall by more than 1.6 million and watched AT&T and Verizon both get [...]

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  4. AT&T was acquiring only the rural assests and the remaining will be re-auctioned later. With AT&T many GSM phone users will now have access in rural America. Alltel was a cdma provider like Verizon. So now many more can have service in these remote areas even if by roaming. Coverage in these remote areas can only be effectively provided w/ low bandwidth spectrum which only Alltel and Verizon had. So who would win if a underfunded firm acquired these rural assets that require enormous resources? Definitely not the consumer.

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  5. I’m skeptical about the claims of cableco interest. The Bloomberg article you reference cites Cox, but they’ve only been interested in building out wireless in their own footprint, and I could only find 13 of the 100 CMAs required to be divested that were even remotely close to Cox’s service areas. And given that the article also cites analysts as saying that Cablevision “may be another contender” — and none of the CMAs are within 500 miles of Cablevision’s footprint, not to mention that Cablevision has shown absolutely zero interest in getting into the cellular biz — well, that kind of reduces its credibility.

    As Mike K has said, these assets are in predominantly rural areas – low volume, low revenue, high cost, and not exactly prime properties for a new entrant. Had a KKR or the like won the auction, the most likely result would have been a HawaiinTel — a privatization with a significant debt burden, leading to reduced investment, degraded service, eventually resulting in bankruptcy (and probably an asset purchase by AT&T…).

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  6. Thanks DG You nailed exactly what I was getting at.

    My main point also, and to Stacy is that these assets would be squandered by the likes of firm who could not invest in them, do not have a customer base and would have to charge any way they could. The real crime is not to fully utilize the assets when real consumers have a need for them. The whole new entrant thing in a (as you say) “a low volume, low revenue, high cost” structure is silly.

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  7. [...] Christopher pointed to several reasons for the upsurge in data usage by subscribers. Its smartphone lead could grow even further following Monday’s $2.35 billion purchase of Verizon’s rural wireless spectrum. We asked at the time whether the move was simply a blocking tactic by AT&T to keep rivals at bay. [...]

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  8. [...] AT&T Keeps New Wireless Entrants at Bay for $2.35B [...]

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