Qualcomm Sells FLO TV Wireless Spectrum to AT&T For Nearly $2 Billion

Last June, Qualcomm (NSDQ: QCOM) CEO Paul Jacobs described the ultimate exit path if wireless TV service FLO TV didn’t turn around: “Say the whole thing blew up, the spectrum itself is worth almost $2 billion based on the latest spectrum auction.” The whole thing did blow up — we were first to report in October that the service was being canceled — and now Qualcomm has a $1.93 billion deal to sell the wireless spectrum to AT&T (NYSE: T). It also should have a hefty profit to show after years of losses on FLO TV; the sale price is nearly three times the $683 million it paid for the spectrum, and double what people had expected it to fetch.

Qualcomm still plans to shut down FLO TV in March. The spectrum deal isn’t expected to close until the second half of the year pending regulatory approval. More details in the release.

The deal confirms earlier reports from November of a possible sale to AT&T, although the price tag is nearly double what people suspected the spectrum could fetch.

The spectrum buy could mark a step-change for AT&T, which has been fighting a PR war over the quality and capacity of its current wireless data network.

AT&T says it plans to use the unpaired spectrum — which is from the lower 700 MHz D and E Block (Channel 55 and 56) — as a “supplemental downlink, using carrier aggregation technology.” This is designed to deliver “substantial capacity gains by enabling unpaired spectrum to be used in conjunction with paired spectrum.” The idea is to use the spectrum to alleviate heavy traffic from data-intensive applications like mobile video streaming and media file downloads.

Important to note that this spectrum buy, however, won’t be alleviating any of the capacity/coverage issues on the current network: “AT&T expects to begin deploying this spectrum once compatible handsets and network equipment are developed,” the operator notes.

Qualcomm says that it is working to incorporate carrier aggregation technology into its own chipset roadmap and intends to market this technology globally.

What’s more, this could be the beginning of more spectrum purchases from AT&T. Jonathan Chaplin of Credit Suisse notes, “DISH owns complimentary E-Block licenses covering 230MM POPs. We believe AT&T will want to purchase these also.”

Qualcomm had high hopes for its mobile TV service but faced setbacks on a number of fronts: among them were a lack of devices to support the service. And outside the U.S., FLO TV never took off beyond the trial phase — partly because one market where Qualcomm had hoped to make a dent, Europe, had opted to back a different mobile TV standard.

Jacobs recently admitted that in the U.S. FLO TV had only managed to attract 1 million sign-ups, and probably even fewer actual subscriptions.

While AT&T is buying the spectrum, there appear at this point to be no takers for rest of the FLO TV assets. Qualcomm has so far incurred restructuring charges of $175 million related to FLO TV although now with the sale of spectrum assets to AT&T that charge will go up.