AT&T Acquires TeleCorp PCS

Wireless Services division gains spectrum, market coverage in $4.7 billion all-stock transaction.

In an effort to increase its spectrum and market coverage at the same time, AT&T Wireless Services last week announced plans to acquire TeleCorp PCS Inc. in an all-stock transaction worth $4.7 billion.

AT&T Wireless already owns 23 percent of the Arlington, Va., company, which also provides wireless services.

The boards of directors of both companies approved the transaction last week and the deal is expected to close in the first half of next year. It is the first major transaction for AT&T Wireless since it spun off from AT&T Corp. in July.

TeleCorp offers wireless service under the SunCom brand name to cities in 14 states in the Southeast and Midwest, including New Orleans; Nashville and Memphis, Tenn.; and Louisville, Ky. It operates under the same wireless standard, TDMA (Time Division Multiple Access), as AT&T Wireless.

"With this transaction ... AT&T has literally zipped up the middle of the country, from the Great Lakes to the Gulf of Mexico," said Jerry Vento, CEO of TeleCorp in Arlington, Va., in a conference last Monday announcing the deal.

In that vein, officials said the acquisition shouldnt result in layoffs. "These are not overlapping markets," said John Zeglis, AT&T Wireless CEO and chairman. "This is not a deal that is going to be made by vast layoffs. We are spectrum-rich over this TeleCorp territory."

Buying up smaller companies is one way of acquiring spectrum at a time when it seems harder than ever to acquire it from the government.

Earlier this month several government agencies developed a plan to assess new spectrum for use by wireless carriers. The National Telecommunications and Information Administration, the Federal Communications Commission and the Department of Defense are examining the potential use of the 1710-1770 and 2110-2170 bands for commercial services.

Carriers had been pushing for use of the 1770-1850 band, but it is not part of the assessment because it is in use by the Defense Department. So far, the DOD has given no indication that it will vacate it, especially in light of the current military situation in the United States.

The federal government plans to finish its assessment by late spring, at which point the NTIA will coordinate with other executive branch agencies and the FCC to come up with some new solutions for allocating spectrum.

The FCC is already trying to determine how to reallocate spectrum from mobile satellite services and TV broadcasters to make room for wireless carriers, but the process has been slow-going.

Meanwhile, carriers are still trying to get their hands on the spectrum they won in a January auction and then lost when a federal appeals court ruled that the spectrum belonged to NextWave LLC, the original licensee. The FCC had repossessed NextWaves spectrum when the company was unable to pay its bills and filed for bankruptcy. The FCC then resold the spectrum to other, larger carriers, but those carriers had to give up the licenses when NextWave won its appeal.

The FCC continues to appeal the courts decision. When NextWave won its appeal, company officials insisted that they planned to hold onto the spectrum and launch a new wireless network. But now officials have confirmed that the company is in talks with other wireless carriers and the FCC over possible negotiations.