AT&T discloses too much in merger filing

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AT&T on Thursday somehow managed to file a document relating to its T-Mobile acquisition that wasn’t redacted, which noted that it would have to spend $3.8 billion to cover rural areas with its planned LTE network. According to Wireless Week, which cites the letter, the filing indicates that AT&T planned to cover 80 percent of the country with LTE service, but that the additional 55 million Americans it would cover to reach the 97 percent mark carried that $3.8 billion price tag. From Wireless Week quoting the letter:

“AT&T senior management concluded that, unless AT&T could find a way to expand its LTE footprint on a significantly more cost-effective basis, an LTE deployment to 80 percent of the U.S. population was the most that could be justified,” AT&T counsel Richard Rosen stated in the letter.

The company said its merger with T-Mobile would spread the cost of the LTE expansion over a larger revenue base, allowing it to “better absorb the increased capital investment and lower returns associated with deploying LTE to over 97 percent of the U.S. population.”

Spending $3.8 billion to cover 55 million people is a fairly high price tag and may not be sound economics for the operator. However, AT&T is telling politicians that this T-Mo deal should happen because it helps bring LTE service to 55 million Americans that wouldn’t otherwise get it. Now we can see the economic thinking behind that, but AT&T is also willing to spend $35.2 billion more buying an entire wireless company. The question is why spend a total of $39 billion on T-Mobile and toss in the additional $3.8 billion for covering almost all of the U.S.?

AT&T says it’s the spectrum, and it does benefit from the AWS spectrum T-Mobile has for deploying its LTE network, but spectrum is not the only answer as Sprint has made the case that AT&T could take it’s existing spectrum and work things out. There’s also the idea that a stronger AT&T and Verizon would lead to a weak or incapacitated Sprint, which then effectively cuts down on competition by killing two companies with one deal. So why has AT&T decided it wants to be fiscally prudent about deploying LTE but then turning around to spend ten times that to take out T-Mobile?

In other AT&T news, we covered a possible setback earlier this week, but the Wall Street Journal today is reporting that the nation’s No. 2 carrier has hired Merrill Lynch to divest assets.

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