AT&T Mobility (NYSE: T) is no longer planning to build a nationwide wireless network for airplane passengers, and will instead invest in international and video products.
The news, first reported by Runway Girl Network, comes shortly after AT&T announced plans to acquire Mexican wireless network operator Iusacell for $2.5 billion, and as it works to compete its $49 billion acquisition of DirecTV.
"After a thorough review of our investment portfolio, the company decided to no longer pursue entry into the Inflight Connectivity industry," Fletcher Cook, a spokesman for AT&T, said in a statement to Bloomberg. "We are focusing our capital on transformative investments, such as international and video."
AT&T recently said its Project VIP network investment plan is ahead of schedule and that it has "essentially completed" its LTE network buildout. The carrier also reduced its capital expense budget for next year by 14 percent to around $18 billion.
The news that AT&T is vacating the in-flight Wi-Fi space appeared to buoy others in the market. As Bloomberg pointed out, Gogo's stock rose 10 percent immediately after the news broke. Gogo has spent about $1 billion building its business and EV-DO network to serve airlines. "We look forward to competing with existing competitors and anyone else who wants to get into the space," Gogo CEO Michael Small told Bloomberg.
AT&T announced in April that it would build an "innovative air-to-ground network" using LTE technology and some of its spectrum to offer in-flight Wi-Fi services starting in late 2015. The action directly challenged current in-flight connectivity players like Gogo, Row 44, Inmarsat and others. AT&T said it would partner with aerospace company Honeywell to install the required hardware on airplanes to support the service. Honeywell said the service could generate as much as $1 billion in revenue over the next decade, Reuters reported in April, though AT&T declined to provide its own revenue estimates.
In an FCC filing that came to light in August, AT&T offered an insight into the reasons behind its in-flight Wi-Fi plans. The company said it would likely use its WCS C and D Block spectrum to provide in-flight Wi-Fi services because pointing the antennas up at the sky would reduce the possibility that a standard, ground-targeted wireless network would interfere with operations in adjacent bands, including Sirius XM radio.
AT&T in 2012 acquired $600 million worth of more WCS spectrum from NextWave. It's unclear what the carrier will now do with those airwaves.
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