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AT&T's Options: A Spectrum Buy-Up?

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
12/19/2011

If the now-kaput T-Mobile US Inc. buyout was all about spectrum for AT&T Inc. (NYSE: T), then one way Ma Bell could make up for the loss is by going on a spectrum-buying spree, like its rival Verizon Wireless . (See AT&T Drops Bid to Acquire T-Mobile and VZ Wireless Nabs Cox's AWS Spectrum for $315M .) The question for AT&T will be: Where it can get suitable spectrum?

T-Mobile was the easiest option for AT&T, because the carrier was already operating 3G GSM services on its 1,700/2,100MHz AWS spectrum. Other bands are open to AT&T, but many of its options would involve a serious buildout to even get services operational. (See AT&T Drops Bid to Acquire T-Mobile.)

One possibility put forward by UBS Research in a note Monday is that AT&T could buy S-Band spectrum from Dish Network LLC (Nasdaq: DISH) This is spectrum that Dish acquired from TerreStar Corp. and DBSD with an eye toward creating a hybrid satellite and terrestrial network. [Ed note: Hmmm, haven't we heard this one before?] (See Dish Sizing Up Mobile Broadband Service .) UBS has this to say on AT&T's Dish-y option:

    In the near-term, a best-case scenario sees Dish getting a waiver without restrictions, then selling the S-band to AT&T for ~$0.69/MHz-POP (in-line w/VZ/SpectrumCo), and its 700 MHz licenses for ~$0.90/MHz-POP (similar to T/QCOM). This values the spectrum at $9.4B or $21/shr vs. the $3.6B Dish paid. Removing this value for the spectrum values the DBS business at just 2.1x 2012E EBITDA. However, we believe this scenario is unlikely to be realized.


In fact, the analysts believe that the Federal Communications Commission (FCC) would "use SkyTerra as the precedent and seek to block Dish from selling the S-band to AT&T."

If that's the case, AT&T's options start to get more closed in. Ma Bell has been linked with LightSquared in the past. But -- as with Clearwire LLC (Nasdaq: CLWR) -- Sprint Corp. (NYSE: S) appears to have that deal locked down, assuming service ever gets off the ground.

— Dan Jones, Site Editor, Light Reading Mobile

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