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AT&T Closes Verizon Spectrum Buyout

T VZ ATNI

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AT&T Inc. (T - Analyst Report) recently announced that it has closed the acquisition of airwaves from Verizon Communications Inc. (VZ - Analyst Report) for $1.9 billion. Under this transaction, the company received spectrum in the 700 MHz B band. The purchase will bolster the company’s network capacity in 18 states across the U.S covering a population of 42 million.

Apart from the cash consideration, Verizon received Advanced Wireless Services (AWS) spectrum licenses from AT&T in  areas like Phoenix, AZ.; Los Angeles and Fresno, CA; Albuquerque, NM; and Portland, OR. The deal went through Federal Communications Commission (FCC) approval last week.

AT&T also plans to acquire spectrum from Atlantic Tele-Network Inc. (ATNI - Snapshot Report) for $780 million. Further, the company is likely to take over the largest prepaid wireless operator in the U.S. – Leap Wireless International – for $1.2 billion.

This acquisition will also give AT&T control over Leap’s spectrum in the PCS and AWS bands covering 137 million people, thereby enhancing the spectrum base of the former. AT&T plans to use the unutilized spectrum of Leap to expand its 4G LTE deployment, rendering more capacity, better network connectivity and increased mobile Internet usage.

AT&T’s LTE network serves as the benchmark of mobile technology and the life-blood for operators across the world. The company is running ahead of schedule to deploy 4G Long-Term Evolution (LTE) services. The company currently covers about 225 million users with its services and expects to connect 270 million people by 2013 end.

Given the accelerated rate of investment in network build-out and spectrum acquisition, we believe AT&T is likely to remain successful in its LTE growth goals, leading to higher revenues and improved earnings per share.

Currently, AT&T retains a Zacks Rank #3 (Hold).

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