AT&T to Hit the Airwaves

AT&T Takes SpectrumEvelyn M. Rusli, 10.09.07, 11:40 AM ET
AT&T

The wireless wars are heating up.
On Tuesday, AT&T (nyse: T - news - people ) said it will purchase spectrum licenses from Aloha Partners for $2.5 billion. By buying the 700-megahertz spectrum licenses, the telecommunications giant will significantly expand its footprint in top cities.
Under the deal, AT&T will get 12 MHz of spectrum in the 700 MHz frequency, which covers 196 million people in 281 markets. This spectrum contains 72 of the top 100 metropolitan areas, including ’s top 10 markets.
"Customer demand for mobile services, including voice, data and video, is continually increasing," AT&T senior executive Forrest Miller said. "Aloha's spectrum will enable AT&T to efficiently meet this growing demand.”
Investors warmed up to the deal, as shares of AT&T edged up 0.2%, or 8 cents, to $42.01 in morning trading.
The deal will give AT&T a leg up in the race to claim a large stake in the highly coveted 700 MHz frequency. The 700MHz frequency is prized for its signal strength, making it an attractive channel for data and video transfers. In January, the Federal Communications Commission will auction 60MHz of spectrum in the 700 MHz. Many expect the bidders to include traditional mobile services companies, such as AT&T and Sprint Nextel (nyse: S - news - people ), and a smattering of unexpected tech names, like Google (nasdaq: GOOG - news - people ).
This may be the first of many big-ticket purchases for AT&T, as it builds its empire.
In September, Oppenheimer analyst Thomas Eagan predicted that AT&T would takeover EchoStar, a satellite television company. Eagan said the acquisition was inevitable because AT&T has struggled to jump-start its own internet television service. "Given the lack of success of AT&T's U-Verse rollout, it seems to us a matter of when, NOT if, AT&T acquires EchoStar," said Eagan. He added that the telecommunications giant would be willing to shell out a hefty premium for the company, saying that AT&T will pay shareholders more than $56 a share.
Indeed, AT&T has the cash power to back these acquisitions. In April, the company said profits doubled from a year ago, amid strong wireless sales and cost synergies from the 2006 takeover of BellSouth. In addition, AT&T is riding the iPhone craze, as the only service provider for Apple (nasdaq: AAPL - news - people )’s new mobile device. (See: " iLove iPhone?" )