AT&T Hunts Spectrum
By GINA CHON, ANTON TROIANOVSKI and ANUPREETA DAS The collapse of a $39 billion acquisition isn't stopping AT&T Inc. from exploring other wireless deals.
Barely two months after the phone giant's offer to buy T-Mobile USA fell apart amid objections from regulators, AT&T is already studying new deals that could increase its access to the airwaves, including potential transactions with Leap Wireless International Inc., Dish Network Corp. or MetroPCS Communications Inc., people familiar with the matter said.
The companies declined to comment.
At stake for AT&T and other carriers is a limited supply of wireless spectrum licenses that are key to building out their networks, as smartphones and tablets drive a sharp increase in mobile data use. Congress has complicated matters with halting progress toward putting more wireless licenses up for auction.
The spectrum needs became more pronounced this week after regulators rejected a plan for a new broadband network by start-up LightSquared Inc., taking away one potential source of wireless capacity for now. And the federal spectrum auctions that Congress is considering are likely more than a year away.
Although AT&T is actively engaged in discussions with some of the parties, there are no deals yet on the table, and it would likely be months before any come to pass, people familiar with the matter said.
Government agencies that would have to approve any transactions remain concerned about declining competition in the cellphone market, and election-year politics could complicate things further.
The talks between AT&T and other wireless providers show the pressure AT&T is under to line up spectrum. Its larger competitor, Verizon Wireless, said in December it would pay $3.6 billion to buy one of the last large swaths of unused airwaves in the U.S. from several cable companies. That deal still needs approval from the Federal Communications Commission.
AT&T Chief Executive Randall Stephenson last month expressed frustration with the FCCs reviews of mergers and acquisitions as wireless companies wait for the government to put more spectrum up for auction. "To meet customer demand, we have to continue our push to add spectrum in the open market," Mr. Stephenson said on the conference call with analysts.
AT&T and the FCC also have scuffled over how the agency determines when a company has too much spectrum and what restrictions it can impose on future auctions.
AT&T was counting on the acquisition of T-Mobile, which would have merged the country's second and fourth largest cellphone providers, to help solve its spectrum constraints. But the Justice Department and the FCC said the deal would lead to higher prices and less innovation.
AT&T insists it needs new spectrum, though the company says it has enough access to the airwaves to deploy its fourth-generation mobile broadband network this year and next.
A fresh source of spectrum could be federal auctions of spectrum currently used by television broadcasters. Such an auction would be authorized by Congress in legislation that was still being hammered out on Wednesday to extend the payroll-tax cut.
Acquiring Leap Wireless, which operates the Cricket brand of prepaid service and is the nation's sixth-largest wireless carrier, is one possibility AT&T is studying, the people familiar with the matter said.
The two sides have been engaged in talks about a potential deal, which could give AT&T access to spectrum in dozens of markets valued by J.P. Morgan Chase & Co. analysts at about $2.1 billion. Leap's market capitalization is $686 million.
The two parties had positive talks last year when AT&T was looking to sell off some assets to try to gain regulatory approval for the T-Mobile transaction, people familiar with the matter said.
As a result, AT&T sees a Leap deal as more possible than some of its other options, the people said. However, Leap's spectrum holdings are relatively small and don't cover the whole country, meaning AT&T would likely need more to satisfy its long-term needs, the people added.
AT&T is also exploring how it might gain access to spectrum controlled by satellite TV operator Dish, people familiar with the matter said. Dish has indicated to AT&T that it doesn't want to sell spectrum outright and wants to build out a high-speed wireless broadband network of its own, the people said.
Dish still could pursue joint ventures or network sharing agreements, whether with AT&T or another party such as T-Mobile, the people said. Dish could also decide not to pursue any deal.
Last year, Dish bought two satellite operators, DBSD North America and TerreStar Networks, out of bankruptcy for $2.8 billion. Dish is awaiting an FCC ruling on whether it can use the satellite operators' spectrum to support devices that only connect to terrestrial networks.
Trying to acquire prepaid wireless carrier MetroPCS, the country's fifth-largest cellphone operator, is also an option AT&T is considering, but is seen as less of a possibility because the relationship between the two companies has soured in recent months, the people familiar with the matter said.
MetroPCS openly opposed the T-Mobile deal, and discussions with AT&T about possibly buying assets that would have been divested had the deal happened didn't go well, partly because of demands made by MetroPCS, the people said.
Both MetroPCS and Leap are providers of cheap, no-contract cellphone service that's popular in some urban areas and among young people. Unlike T-Mobile, the companies don't have any of the contract-based cellphone subscribers that are AT&T's bread and butter—making an integration with AT&T tricky.
Write to Gina Chon at gina.chon@wsj.com, Anton Troianovski at |
