Bloomberg News

AT&T’s $1.93 Billion Qualcomm Airwaves Purchase Wins Approval

January 03, 2012

(Updates with company, FCC comments in fifth paragraph.)

Dec. 23 (Bloomberg) -- AT&T Inc., the largest U.S. phone company, won approval from federal regulators for its $1.93 billion purchase of Qualcomm Inc. airwaves three days after dropping its plan to buy T-Mobile USA Inc.

The sale of frequencies covering 300 million people was cleared yesterday, the Federal Communications Commission said in an order published on its website. AT&T can’t use the airwaves in a way that interferes with other wireless carriers, the agency said.

Given the conditions imposed, the proposed deal “would not result in competitive harm that would outweigh the public- interest benefits of this transaction,” the FCC said in the order. The agency said the deal would support “our goal of expanding mobile broadband deployment throughout the country.”

FCC Chairman Julius Genachowski recommended on Nov. 22 that fellow commissioners approve the airwaves sale. On the same day, he moved to oppose AT&T’s proposed merger with smaller wireless competitor T-Mobile. AT&T abandoned on Dec. 19 the T-Mobile purchase designed to increase its airwaves holdings.

AT&T, based in Dallas, and Qualcomm, based in San Diego, viewed the deal as a win.

“This spectrum will help AT&T continue to deliver a world- class mobile broadband experience to our customers,” Bob Quinn, AT&T’s senior vice president for federal regulatory affairs, said in a statement late yesterday.

Video, Games

AT&T plans to use the new spectrum to help increase speed of mobile devices as users demand more bandwidth, especially for video and games.

Qualcomm said in a statement today that it plans to work with AT&T to develop chips for new mobile devices that can make use of the additional spectrum, and then market that technology globally.

“This is a positive outcome for Qualcomm and our stakeholders,” Paul Jacobs, chairman and chief executive officer of Qualcomm, said.

The FCC said in its order approving the sale that AT&T customers will experience faster and better service.

“The record suggests that customers are likely to experience these benefits as faster and more consistent download time, a more seamless video or gaming experience, and better resolution, particularly during periods of peak use,” the FCC stated.

Competitive Disadvantage

The FCC’s decision disappointed the Rural Cellular Association because it doesn’t allow smaller wireless carriers access to the spectrum, placing them at a competitive disadvantage, Steven Berry, president of the association, said in an interview today.

The Washington-based group represents small and regional carriers, including U.S. Cellular Corp. and Atlantic Tele- Network Inc.

“When the FCC had an opportunity to ensure that we had a competitive ecosystem going forward … they missed the boat,” Berry said. “Every day that our smaller carriers can’t get into the marketplace in the 4G world, is another day they risk going out of business.”

Rural phone companies asked the FCC to use the Qualcomm deal to ensure their customers can use AT&T airwaves.

Customers’ data connections may not work when they travel away from home when their phones can’t operate on airwaves assigned to dominant wireless carriers AT&T and Verizon Wireless, Berry said.

‘Critical’ Purchase

AT&T agreed in December 2010 to the purchase of the frequencies, which Qualcomm acquired for a mobile-television service it later closed. The Justice Department ended its review of the Qualcomm sale in February, the chipmaker said in a Nov. 23 filing.

Buying the spectrum “is critical” to help AT&T meet burgeoning demand for wireless Internet service as consumers increasingly adopt tablet computers and smartphones, AT&T and Qualcomm said in a March 21 FCC filing. The airwaves purchase won’t harm competition, the companies said in the filing.

AT&T “doesn’t need this spectrum to improve its own offerings,” said Matt Wood, policy director of Florence, Massachusetts-based Free Press, a nonprofit group dedicated to promoting media diversity. “AT&T can and should upgrade its own networks to provide better service to customers.”

The sales agreement with AT&T was set to expire Jan. 13, with either party able to extend it for 90 days, Qualcomm said in a Nov. 2 filing.

--Editors: Steve Walsh, Timothy Franklin

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Chris Strohm in Washington at cstrohm@bloomberg.net

To contact the editor responsible for this story: Steve Walsh at swalsh@bloomberg.net


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