AT&T agrees to buy wireless spectrum from Qualcomm

Carrier to pay $1.93 billion for FLO TV spectrum; plans to use for 4G network

AT&T, the second-largest wireless carrier in the U.S., has agreed to purchase $1.925 billion worth of wireless spectrum from Qualcomm. In an announcement made Monday, the telecommunications giant said the extra wireless spectrum will help it provide 4G mobile broadband to its customers in the next few years. (Also see: Qualcomm to stop selling devices for mobile broadcast-video service that no one uses)

Wireless carriers are under tremendous pressure to upgrade their networks to handle the traffic generated by a new generation of smartphone applications and the increasing consumer consumption of multimedia files downloaded or streamed to a growing multitude of devices. And AT&T faces the extra pressure of overcoming negative perceptions of its wireless network, as well as the potential loss of iPhone users who could abandon the network for Verizon, which early next year will become the second U.S. carrier after AT&T to sell the Apple smartphone. According to AT&T, the spectrum it purchased covers more than 300 million people across the U.S., with 70 million located in five major cities -- New York, Boston, Philadelphia, Los Angeles and San Francisco. Qualcomm had the available spectrum because the company was using it for its ill-fated FLO TV, which never really took off and which Qualcomm announced in early October would be shut down next March. Qualcomm bought the wireless spectrum powering FLO TV -- Lower 700 MHz D and E block spectrum -- for only $125 million before sinking another $800 million into FLO TV. Back in October, Edward Snyder, an analyst at Charter Equity Research, said the FLO TV spectrum could be worth $2 billion. Looks like he nailed that one. It also looks like the spectrum was a good investment for Qualcomm, which (assuming there were no other large costs related to the FLO TV airwaves) doubled its money. AT&T and Qualcomm anticipate closing the sale during the second half of 2011.

Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.

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