AT&T to buy Alltel Wireless network to boost spectrum in rural areas; VZW sells record number of LTE smart phones

AT&T still needs more spectrum, despite industry claims there’s enough to go around (please see this post: 

The telco giant has reached a deal to buy remnants of the Alltel (ATN) wireless network for about $780 million to boost its spectrum holdings in rural areas.  AT&T is buying the licenses, retail stores and network assets, along with about 585,000 subscribers, from Atlantic Tele-Network Inc. The acquisition includes spectrum in the 700 MHz, 850 MHz and 1900 MHz bands and is largely complementary to AT&T’s existing network.

The Alltel wireless network covers about 4.6 million people in mainly rural areas across six states – Georgia, Idaho, Illinois, North Carolina, Ohio and South Carolina. It generated revenue of about $350 million for the first nine months of 2012. Alltel was a wireless network that operated in 34 states until it was bought by Verizon Wireless in 2009. Federal regulators made Verizon sell off parts of the network to AT&T and ATN.

Analyst Christopher King at Stifel Nicolaus observed that ATN bought its six-state holdings for $223 million in 2010, meaning it more than tripled its money in three years.

AT&T said it expects that as it upgrades the network in the acquired areas, mobile Internet service will improve for both Alltel and AT&T customers. However, it will need to convert the cell towers from the “CDMA” technology Alltel uses to the “GSM” technology AT&T’s network uses. That means Alltel subscribers will need new phones.

The deal remains subject to approval by the Federal Communications Commission and Department of Justice. The companies said they expect the deal to close in the second half of the year.  For more info, see this press release:

Meanwhile, Verizon Wireless (VZW) is evidently content with the spectrum they already own.  The Verizon Communications-Vodafone joint venture sold a record 9.9m smartphones in the fourth quarter, including 6.2m iPhones. Both figures were slightly higher than analysts had expected.   About 65 per cent of the smartphones Verizon Wireless sold in the quarter, and about half of the iPhones, were LTE devices. Overall, Verizon Wireless sold 12.5m LTE devices in the quarter, and 58 per cent of its subscribers were using a smartphone at the end of December, up from 44 per cent a year earlier.

During the quarter VZW added a net 2.1m monthly contract subscribers, bringing its total number of subscribers, including pre-paid, to 98.2m.

“We made a stragic decision to take advantage of our 4G LTE lead and invest in growth which resulted in record high postpaid (monthly contract) gross and net adds in the quarter,” said Fran Shammo, Verizon’s chief financial officer.
Mr Shammo said LTE is also about five times more efficient to operate than the older 3G technology, helping the company to offset the impact on margins of higher sales of heavily subsidised smartphones.

More info at:

AW Comment:  We think that both AT&T and VZW control too much spectrum in the U.S. and have formed a wireless telco duopoly.  Would like to see more competition from a re-energized Sprint (with Softbank’s financial backing) and a merged T-Mobile-Metro PCS.  Will that happen?  Only time will tell.