The New AT&T: It’s about the spectrum

[Commentary] You can make as many arguments as you like about what AT&T stands to gain by buying T-Mobile, but in my view it boils down to just one: frequencies.

Sure, AT&T would gain another 34 million subs, it would have access to a largely built high-speed packet access plus (HSPA+) network, it would leapfrog over Verizon Wireless in scale and sheer dominance in the US market. But I think none of that justifies the huge integration headaches and costs necessary to knit their two networks and operations together (the Cingular-AT&T Wireless integration is probably still fresh in memory). However, with a single stroke AT&T would alleviate all of its spectrum worries for the next few years, giving it not only a consistent and large band over which to launch LTE but also more options than it knows what to do with when it comes to future network planning. AT&T certainly isn't hiding the fact. In multiple interviews and presentations AT&T has stressed how the deal will relieve it of having to ferret out new spectrum in the near term, while its competitors may not be feel so comfortable.

So how big exactly would AT&T’s spectrum position be post-merger? Conveniently Bernstein Research produced a handy analysis covering just such a scenario. Assuming its acquisition of Qualcomm’s 700 MHz FLO spectrum is approved as well as the T-Mobile acquisition itself, AT&T would have a whopping 132.4 MHz of spectrum on a population-weighted average per market. In comparison, Verizon Wireless and Sprint would have a combined 140.2 MHz. Clearwire, which often brags about its exalted spectral holding has an average of 100 MHz in most markets and maxes out at 120 MHz in its most license-rich markets. Of course, the Federal Communications Commission and Justice Department will most certainly make AT&T divest that spectrum in many markets. But any resulting deal will most certainly still leave AT&T with the premier spectrum position in the U.S., both in terms of quantity and quality.