According to legal documents inadvertently made public by AT&T (NYSE: T) Thursday, it would have cost the carrier $3.8 billion to build an LTE network that would cover 97 percent of Americans. However, AT&T has instead proposed that it be allowed to spend $39 billion to acquire T-Mobile in order to achieve the same goal despite widespread concern that such a merger would harm consumers.
Wireless Week deserves credit for spotting the document Thursday, which was apparently supposed to be redacted. Notes of a meeting between AT&T executives and the Federal Communication Commission were included, a meeting where AT&T said that it couldn’t justify spending the $3.8 billion extra it would take to cover 97 percent of the country with LTE instead of 80 percent coverage without the extra revenue it would get from T-Mobile’s customers to defray those costs.
However, AT&T said in July that it expects to spend $20 billion on capital expenditures in 2011, up slightly from its previous expectations: without T-Mobile. Would an extra investment of $3.8 billion over the next several years really not make sense, especially considering (as noted by DSL Reports) that AT&T would look quite silly trying to compete with Verizon in a few years with only 80 percent of the market covered by LTE? And considering that AT&T’s profits and cash flow are improving as competitors like T-Mobile and Sprint (NYSE: S) falter?
It doesn’t make much sense, especially when you consider how much spectrum AT&T already owns, as tabulated by CNET. Which brings us back to the true motivations for AT&T’s merger: it wants access to smartphones from handset makers who would have no choice but to work with largest carrier in the U.S., as to capitalize on the surging demand for wireless data services and deny handset makers other outlets for their products.
Updated 8/15: AT&T sent this statement, which it had also sent to Wireless Week: “Our latest letter to the Commission is fully consistent with AT&T’s prior filings. This letter makes clear the dramatic scale of our commitment to bring 4G LTE mobile broadband to 97 (percent) of all Americans, and that without this merger AT&T could not make this expanded LTE commitment.”