AT&T's $2.5B Investment in 700 MHz Spectrum Spells Trouble For Qualcomm

AT&T (T) Tuesday morning announced that it will pay $2.5 billion to an investment group called Aloha Partners for spectrum licenses in the 700 MHz frequency band that covers 196 million people. More licenses in that bandwidth will be made available in January at an upcoming FCC auction; the spectrum being sold until now had been used for analog television broadcasts.

The FCC has mandated that television broadcasters switch to digital-only signals in 2009; there has been intense scrutiny on potential bidders in the coming auction; rumors have had everyone from Google (GOOG) to Apple (AAPL) planning bids.

AT&T said the spectrum it bought Tuesday could be used for a variety of purposes including high-speed data or video.

The Wall Street Journal notes that Aloha’s HiWire unit had planned to launch a nationwide mobile TV service.

Back at last year’s Consumer Electronics Show, Verizon (VZ) and Qualcomm (QCOM) demonstrated a service called Vcast Mobile TV, which used a Qualcomm mobile phone TV service called MediaFLO. In February, AT&T announced that it also planned to offer MediaFLO TV service on mobile phones.

But maybe now AT&T intends to go it alone in mobile TV. Gerard Hallaren, of JRPG.com, asserts that the AT&T deal today is “a clear negative for Qualcomm,” and that “the implication of this is that AT&T is de-emphasizing its relationship with Qualcomm’s MediaFLO mobile TV unit.” The spectrum acquired Tuesday, according to JRPG, “is directly competitive with MediaFLO.”

I’d also note that AT&T has been trying to expand its telco TV operation known as U-verse. There has some speculation that U-verse has not been that successful; in fact, trouble at U-verse has spurred theories that the company could eventually decide to buy EchoStar’s (DISH) Dish Network. On the other hand, imagine you could package U-verse service with a mobile phone television service…that you could watch on your yet-to-be-invented broadcast TV ready Apple iPhone (AT&T, of course, is the exclusive U.S. carrier for the iPhone). The mind boggles.

Comments

[Tom B:]

Obviously, ATT has no chance in succeeding at Wireless TV, but the 700 MHz Spectrum is important and they can sell it if they try to break into TV and subsequently fail. It's a good move, acquiring the bandwidth.

2007 Oct 15 08:51 AM

[notapundit:]

Considering that ATT is a service provider, and not a technology developer, it would seem to be an uphill battle for them to try to go it alone. Then again, Sprint is going it alone with wimax. What tech would ATT deploy in their spectrum? What is ATT's problem with MediaFLO?

2007 Oct 21 11:59 PM

[squawk:]

Sorry, just don't get the leap you make that AT&T's purchase of 700MHz equates to "trouble for Qualcomm." I tend to believe that AT&T's push into this wireless spectrum is more the result of its limited capability of delivering video to landline subs, not wireless ones. But video to the home is not limited to turbo-charged copy, FTTH that AT&T refuses to invest in due to its large footprint, as well as DBS. An alternate path is terresterial wireless. Hence, its interest in the 700MHz spectrum.

Now that's not to say that AT&T would not be interested in delivering video to its wireless phone customers over this spectrum, but I think from an investment standpoint, it makes a whole lotta sense to use such spectrum to deliver video to the home so it can offer the "triple-play" to its existing telco subscriber base . . . before it loses them to cable. I have to think the potential revenues from successfully delivering video to the home (i.e. HDTV) dwarf whatever revenue projections are estimated by delivering video to its wireless customers.

Sorry, your hypothesis just doesn't seem to be that convincing.
AT&T's U-Verse has clearly been a failure as an investment. It has limited scalability & is incapable in my estimation of providing video to the lion's share of AT&T enormous local exchange foot print. Hence, the rumors of interest in Echostar & now more recently DirecTV.

2007 Oct 24 05:07 PM