FCC to Agree on AT&T's WCS Plan

The Federal Communications Commission (FCC) is reviewing AT&T Inc.’s (T - Analyst Report) proposal to ease rules for the 4G LTE deployments. The commission is planning to sanction the use of the 2.3 GHz Wireless Communication Services (WCS) band into spectrum for deployment of LTE services. The final approval is expected by the end of this month.

The second-largest U.S. mobile service provider will be the biggest beneficiary from the approval, as it holds the most unused WCS licenses for years. According to the FCC current rules, operators cannot use WCS spectrum for mobile internet purposes in order to avoid interference with satellite radio users in adjacent bands.

AT&T has been on a WCS acquisition spree. In June, the company collaborated with Sirius XM Radio Inc. (SIRI - Analyst Report) to deploy LTE services in the 2.3GHz WCS band, while minimizing interference problems. Then in August, AT&T plans to acquire NextWave Wireless for $600 million to boost its WCS spectrum holdings and strengthen its 4G LTE network capacity. The acquisition, awaiting approval from the regulators, is expected to close by the end of the year.

AT&T will also receive licenses in the Advanced Wireless Service (AWS) band from NextWave purchase. If FCC changes the LTE deployment rules, the acquisition could provide AT&T with WCS spectrum coverage to 212 million people, while AWS spectrum will cover only 6 million people. Further, the company intends to buy WCS spectrum from Comcast Corp. (CMCSA - Analyst Report) and Horizon Wi-Com.

AT&T can easily tackle the current spectrum crunch with the WCS spectrum, should FCC gives the approval. Additionally, AT&T is expected to deploy 4G LTE network using WCS spectrum within three years of approval.

The WCS spectrum would enhance AT&T’s capacity and provide a competitive edge against its major rival Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ - Analyst Report) and Vodafone Plc (VOD - Analyst Report) in deploying 4G LTE services.

We are maintaining our long-term Neutral recommendation on AT&T. The company retains the Zacks # 3 (Hold) Rank for the short term (1–3 months).