Yesterday’s surprising (maybe) announcement of AT&T’s acquisition (pending regulatory approval) of T-Mobile is being billed as a spectrum play for 4G, a move in response to the U.S. Administration’s goal of covering America with wireless broadband. See the Wall Street Journal’s interview with Kevin Werbach for a perspective on this.
However, one analyst says that 70%-90% of AT&T’s current spectrum currently sits unused. AT&T acquired two nationwide aggregations of spectrum that lie mostly unused for roughly one-twentieth of the price they paid for T-Mobile. Interestingly, this (the 1/20th figure) is what the NTIA and CEA said in a recent white paper that broadcasters would need to be paid to clear enough spectrum to meet FCC goals.
You pay a 20-fold premium over bare spectrum because this spectrum – all of which they won’t use – comes with customers and this new customer base will make them the largest wireless provider (they and Verizon will control 70%). So this is really about that market share and the control over pricing this will give them.
In addition to the links above, also see Om Malik’s, What AT&T and T-Mobile Merger Means for Innovation. --Dennis