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Moody's Says AT&T's 700 MHz Spectrum Purchase is Positive
Published on:
AT&T's announcement that it will buy wireless spectrum licenses in the 700 MHz B band from Verizon Wireless is positive for AT&T, which obtains complementary spectrum in attractive markets. Moody's believes that this spectrum purchase and the company's previously announced plan to boost wireless capex will help improve its competitive position.
Moody's believes that these acquisitions will result in incremental debt issuance based on AT&T's announced plans for capex and share repurchase. However, Moody's had expected AT&T to bid aggressively for the 700 MHz licenses, as Verizon began a well-publicized sale process in mid-2012. Additionally, the Atlantic Tele-Network acquisition is within AT&T's run-rate of asset purchases. As such, these future cash outflows were incorporated into Moody's baseline view of AT&T's credit profile. Both transactions are subject to regulatory approval.
Moody's believes that Verizon Wireless has a modest competitive advantage over AT&T Mobility due to its more advanced LTE network deployment, its strong spectrum position and high perceived network quality. Moody's believes that these differentiating factors have enabled Verizon to gain market share over the last several quarters, while AT&T's net subscriber additions have been comparatively weaker.
AT&T is expected to pay $1.9 billion in cash along with a contribution of Advanced Wireless Spectrum (AWS) licenses in five markets for the 700 MHz licenses. The 700 MHz B band from Verizon Wireless covers approximately 42 million people in 18 states. Verizon Wireless has 12MHz of 700 MHz B band spectrum in each these markets so AT&T is expected to pay cash of $3.77/MHz POP plus the value of the AWS spectrum licenses. The deal will add 504 million MHz POPs to AT&T's existing portfolio of approximate 2.4 billion MHz POPs in the 700MHz B band and increase its spectrum depth in major markets like Los Angeles, Chicago and Miami.
This is AT&T's second spectrum acquisition in the past two weeks following the company's agreement to purchase Atlantic Tele-Network Inc.'s assets and spectrum holdings, including 585,000 wireless subscribers and spectrum in the 700 MHz, 850MHz and 1900 MHz bands covering approximately 4.6 million people in six rural states for $780 million.
Tags: [at&t] [radio spectrum] [USA]
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