20 Feb

AT&T buys $18.2 billion worth of AWS spectrum

WRITTEN BY Ray Sheffer FEATURED IN Post-Release Earnings Reports

AWS spectrum auction

In the last part of the series, we learned about some of the probable sources of leverage on AT&T’s (T) balance sheet in 2015. Now we’ll look at another significant expenditure the company will incur this year.

In the recent auction of high-capacity AWS-3 (Advanced Wireless Services) spectrum by the FCC (Federal Communications Commission), AT&T bought licenses worth $18.2 billion. The company bought 251 licenses in total. As you can see in the chart below, AT&T was the biggest bidder in this auction. Verizon (VZ) was the second largest bidder among telecoms, purchasing spectrums worth $10.4 billion. T-Mobile (TMUS) bought only $1.8 billion worth of the spectrums. Sprint (S), however, didn’t participate in this auction. The company already had significant holdings in high-capacity spectrums in the US.

AT&T buys $18.2 billion worth of AWS spectrum

AWS-3 will boost AT&T’s wireless data capacity

According to AT&T, after including the spectrums from this auction, the company now has 96% coverage of the total population in the AWS-3 bands. The company expects to initiate deployment of these spectrums in 2017-18 to boost its wireless Internet capacity.

The spectrums included in the AWS-3 band are high capacity. These high-capacity spectrums have particular significance for wireless telecoms, as they cater to the fast-growing Internet and video traffic. According to AT&T, wireless data traffic increased by 100,000% on its network from the beginning of 2007 to the end of 2014. Please read Why spectrum is the lifeblood of a wireless network to learn more.

You can get diversified exposure to AT&T through the Technology Select Sector SPDR ETF (XLK). The ETF held ~4.4% in the company at the end of January 2015.

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