Kyle St. Romain | BUSINESS | 01.25.2012 @ 9:00 am
AT&T is widely considered the largest wireless provider in North America. It is also widely considered one of the slowest and least reliable. Just ask anyone with an iPhone and they’ll echo a similar tale: “The phone’s great, but AT&T sucks.” Indeed, people who aren’t “cool” enough to have an iPhone yet tout their wireless carrier as being a prime reason why they don’t switch to iPhone. Well, that used to be the argument before iPhone became available with other service plans. What’s their excuse now? Well, the Android is looking better by the day…
As many will remember, AT&T did try to help alleviate some its negative press by increasing its spectrum capacity with a bid of $39 billion for T-Mobile in 2011. That deal, unfortunately, was shot down by US regulators who feared the combined market share would make AT&T, in effect, a monopoly. AT&T didn’t see it worthwhile to sink the legal fees fighting the government. Thus, the problem remains: AT&T needs to acquire spectrum to meet its customers’ needs.
To help alleviate some of its constraints, AT&T is looking to buy capacity in the 700 MHz from Qualcomm. I don’t pretend to know much about wireless spectrum, but AT&T plans have aroused fear amongst smaller carriers who may be forced to change their configurations to comply with AT&T’s proposed changes. There are motions underway that would require AT&T to allow these smaller carriers to roam on their spectrum and effectively spoil the deal.
There are other options available: acquire existing wireless carriers. However, they will likely come at a substantial premium.
On attractive target for AT&T is Dish Network. According to Bloomberg, Dish Network acquired airwaves from bankrupt DBSD North America Inc. and TerreStar Networks Inc. Bloomberg reports that Stifel Nicolaus & Co estimate that AT&T could add an estimated two to four additional years of capacity through the acquisition. Not a long-term solution, but it would buy AT&T some breathing room while it works on something more substantial. However, as you can imagine, AT&T would have to pay a substantial premium to the satellite television company. It’s no secret that AT&T is desperate for its spectrum.
So if you find yourself scanning the stock markets in between brainstorming sessions for your new app, take a look at some of the smaller wireless providers. Companies such as MetroPCS and Leap may fetch substantial premiums as larger companies gobble them up for spectrum capacity.
Click here for Bloomberg’s full coverage of this issue.