On January 22nd, AT&T announced it was buying Atlantic Tele-Network’s (Alltel) wireless business for $780 million in cash, representing the latest move in the USA’s telecom giants boosting their wireless spectrum.
AT&T wins a large slice of bandwidth in the 700 and 800 MHz range, which is considered especially valuable in that it can easily penetrate buildings. The deal also includes bandwidth in the 1900 MHz range. The purchase also includes Alltel’s retail stores and existing network assets, and about 585,000 subscribers, although the network potentially reaches around 4.6 million people in mainly rural areas of Georgia, North/South Carolina, Ohio, Illinois and Idaho.
Alltel’s revenues for the 9-months to September were about $350 million.
Alltel was a much larger business back in 2009, and operated in 34 states. It was bought by Verizon Networks (for $5.9bn) although the FCC ordered Verizon to sell off parts of the network to AT&T and Atlantic. Atlantic paid $223 million in 2010, suggesting the new deal is a three-fold improvement in the unit’s value.
However, the deal comes with a catch in that Alltel uses CDMA technology and not the GSM technology used nationally by AT&T. AT&T, in statement, said it will be converting Alltel’s towers to its GSM technology which means Alltel consumers will need new phones.
The deal is subject to regulatory approval. If it goes through, and few see any material objections given the competition in the marketplace, it will further improve AT&T’s coverage, especially in the 700-800 MHz ranges. It is also meaningful in that AT&T’s wireless subscriber growth has slowed (to just 4.5 per cent in Q3/2012) and was expected to further plateau this year.