Report: AT&T searching for spectrum from Dish, Leap, MetroPCS

Fresh from its bruising and ultimately failed bid to acquire T-Mobile USA, AT&T (NYSE:T) is eyeing Dish Network, Leap Wireless (NASDAQ:LEAP) and MetroPCS (NASDAQ:PCS) for potential deals that could increase its spectrum holdings, according to a report in the Wall Street Journal.

The report, which cited unnamed sources familiar with the deals, noted that although AT&T is actively discussing possible deals, there is nothing on the table and it would be months before any transactions materialized. Representatives from all of the companies declined to comment, according to the Journal

However, it should come as little surprise to industry watchers that AT&T is interested in acquiring more spectrum in the wake of its failed T-Mobile deal. Indeed, as part of its $6 billion breakup fee, AT&T will have to give T-Mobile AWS spectrum licenses in 128 market areas, including in 12 of the top 20 markets in the United States. AT&T CEO Randall Stephenson said last month that the company, one of the largest holders of 700 MHz and AWS spectrum in the country, needs more airwaves to keep pace with mobile broadband demand.

According to the Journal, an AT&T deal with Leap would be the most likely, especially because the companies had positive talks last year when AT&T was furiously working to divest T-Mobile's spectrum and assets to save its bid to acquire T-Mobile. Leap's AWS holdings, like those of MetroPCS, could complement AT&T's own AWS spectrum. AT&T has said it plans to use both 700 MHz and AWS spectrum for its LTE buildout.

Another possibility for AT&T is Dish, which is trying to get the FCC to approve the 40 MHz of S-band spectrum in the 2 GHz range it purchased from TerreStar Networks and DBSD North America. The Journal report said Dish has indicated to AT&T it does not want to sell the spectrum and instead wants to build out its own LTE Advanced wireless network. AT&T has said in FCC filings that the agency should not restrict Dish's ability to sell or lease its spectrum to larger telecommunications companies, a stipulation the agency placed on LightSquared.

Meanwhile, a deal between AT&T and MetroPCS is probably the least likely, the report said, since MetroPCS opposed the T-Mobile acquisition and talks between MetroPCS and AT&T on divestitures related to the deal did not go well last year.

Any AT&T transaction would likely face intense regulatory scrutiny, given the FCC and Department of Justice's opposition to AT&T's proposed purchase of T-Mobile.

While speculation swirls over AT&T's plans, the company is in the process of integrating another swath of spectrum into its holdings. In late December the FCC approved AT&T's $1.93 billion purchase of Qualcomm's (NASDAQ:QCOM) Lower D and E Block 700 MHz MediaFLO spectrum licenses. AT&T has said it will cost another $1 billion to $2 billion to integrate the spectrum into its network. 

AT&T has said it plans to use carrier aggregation technology to meld together Qualcomm's unpaired 700 MHz spectrum with AT&T's existing AWS, 1900 MHz or 850 MHz spectrum holdings. AT&T has said doing so will allow it to double the downlink speeds of its LTE network. However, AT&T said in an FCC filing that it will need to deploy new chipsets and handsets and upgrade its base stations to take advantage of Qualcomm's spectrum, a process that means AT&T won't be able to offer the resulting faster speeds to customers until late 2014.

For more:
- see this WSJ article (sub. req.)

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