AT&T to Buy Wireless Spectrum From Verizon for $1.9 Billion

The deal comes just days after spectrum-hungry AT&T announces a deal to buy Alltel's assets for $780 million.

AT&T, which has aggressively been buying up spectrum over the past year following its failed attempt to acquire smaller rival T-Mobile, is spending $1.9 billion for spectrum from top competitor Verizon Wireless.

The two wireless carriers announced the deal Jan. 25, saying that the $1.9 billion will buy AT&T spectrum in the 700 MHz B band as well as Advanced Wireless Services (AWS) spectrum licenses in a number of markets, including Phoenix, Los Angeles, Fresno, Calif., and Portland, Ore. The licenses acquired by AT&T cover 42 million people in 18 states throughout the country, according to AT&T officials.

The deal will enable AT&T to add to its existing spectrum holdings in the 700 MHz B band and to more quickly deploy its 4G Long Term Evolution (LTE) services to more of the country. The carrier has a goal of reaching 300 million people in the United States with its LTE network by the end of 2014; it currently covers more than 285 million, the company said in December 2012, when it made its LTE service available in Hartford, Conn.

The Verizon deal also comes just three days after AT&T announced it was buying the Alltel brand from Atlantic Tele-Network for $780 million, a move that included spectrum in the 700MHz, 850MHz and 1900MHz bands, as well as Alltel's licenses, network assets, retail stores and about 585,000 subscribers.

Spectrum—and getting more of it—has become the key issue in the wireless industry, as the carriers compete to grow their 4G LTE networks as quickly as possible to meet the demand from an increasingly insatiable public and business sector. It also is an important driver for the country as well, with the Obama Administration making broadband expansion an issue for improving the United States’ competitiveness. In a Jan. 25 blog post regarding the Federal Communications Commission’s upcoming Incentive Auction, Joan March, AT&T’s vice president of federal regulatory, said that “freeing up more spectrum is critical to U.S. economic growth and technological leadership.”

AT&T has been aggressive in acquiring spectrum and got a boost from the FCC in December when regulators approved AT&T's request to buy licenses on the Wireless Communications Service (WCS) and Advanced Wireless Services (AWS-1) spectrum bands from Comcast, Horizon, NextWave and San Diego Gas & Electric. In a Dec. 18 blog post, Marsh said that the “long era of dispute and uncertainty surrounding the WCS spectrum band is finally over,” and that with the FCC’s approval, “AT&T will be able to complete acquisitions that will give it a path to robust commercial LTE deployment in the WCS ban.”

However, not everyone views AT&T’s spectrum buying spree as a good thing. Harold Feld, senior vice president of the open Internet advocacy group Public Knowledge, said AT&T efforts will hurt competition in the wireless industry. In a blog post Jan. 25, between the Allnet deal and AT&T’s acquisition of the Verizon spectrum, “this was exactly the anti-competitive scenario many of us predicted when Verizon made the offer to sell off its 700 MHz licenses in order to bulk up on its AWS footprint. Nevertheless, the FCC refused to impose a condition prohibiting the sale of the licenses to AT&T on the grounds that it could wait to see who purchased the licenses before acting. Well, now we know, and the FCC has the ‘hypothetical’ transaction it did not want to consider last summer squarely before it today.”

Feld characterized the deal as being AT&T daring the FCC to stand up to it, and as a test to the FCC’s commitment to a more competitive wireless market.

Both the FCC and Department of Justice will need to approve the deal, and both AT&T and Verizon expect it to close quickly after the necessary approvals are received, according to Robin Nichol, executive director of corporate communications at Verizon.

The spectrum licenses acquired from Verizon touch on regions through the country, including the West (California, Colorado, Wyoming, Idaho, Utah and Washington), the South (Florida, Louisiana, Tennessee and Virginia), the Southwest (New Mexico and Texas), Midwest (Illinois, Montana, Ohio, South Dakota and Oklahoma), and Northeast (New York), according to AT&T officials.

Along with that spectrum, the deal also includes Grain Management acquiring a single AWS license from AT&T, and AT&T leasing 700 MHz spectrum from Grain in three markets. In addition, Verizon will lease from Grain the AWS license that Grain is acquiring from AT&T. That license covers Dallas, according to Verizon.