AT&T officially filed to buy the fourth-place wireless carrier T-Mobile for $39 billion, with federal regulators Thursday (pdf).

AT&T says the merger fits in with the FCC’s national broadband plan, will create new jobs and benefit citizens with better mobile coverage. According to the filing, these benefits include:

• Repurposing of Redundant Control Channels. The transaction will enable the combined company to eliminate redundant control channels and promptly free up 4.8 to 10 MHz of extra spectrum, depending on the market.
• Channel Pooling. This transaction will enable the two networks to group their respective GSM spectrum channels into larger pools. This efficiency alone is expected to increase GSM capacity by as much as 15 percent in some areas.
• Utilization Efficiencies. For example, if AT&T’s GSM network is congested in a market, while T-Mobile USA’s is underutilized, the combined company could use spectrum in the underutilized network to relieve that congestion.
• Broader deployment of LTE. Over time, the transaction will enable the combined company to transition T-Mobile USA’s HSPA services off of its AWS spectrum in many markets and devote that spectrum to the deployment of LTE services that are 30 to 40 percent more spectrally efficient. T-Mobile USA’s AWS spectrum covers additional people in areas where AT&T lacks sufficient 700 MHz or AWS spectrum.

AT&T concludes:

In short, this transaction is the most pro-consumer solution to the critical capacity challenges facing these two companies. It is also the most pro-innovation and pro-investment solution for America.

But critics doubt the AT&T/T-Mobile merge would do little else than eliminate a competitor.

• In 2008, AT&T spent $6.6 billion to acquire an additional 227 B Block licenses during the FCC’s 700 MHz auction.
• Later, AT&T acquired 700 MHz spectrum from Hiwire in a $2.5 billion deal and Qualcomm’s unpaired MediaFLO licences for $1.93 billion for 12MHz of the lower 700MHz D and E block.
• AT&T also bought Paul Allen’s 700 MHZ Vulcan Spectrum licenses in Washington and Oregon that he acquired in 2003, for an undisclosed price. Vulcan Spectrum’s A- block licenses, which also cover the Seattle and Portland areas, weren’t included in the proposed sale to AT&T.
• AT&T’s total investment in 700 MHz spectrum is therefore $6.6B (from the FCC’s 2008 auction) + $2.5B (Aloha Partners purchase) + $1.9B (Qualcomm purchase), or a total of $11 billion. Not including Paul Allen’s spectrum. AT&T (under Cingular brand), also bought $1.3 billion in AWS spectrum that they have never activated.

Bottom line: AT&T has been sitting on more than $12 Billion in spectrum for years. T-Mobile is using almost all of theirs. LTE on AWS (at 1.7/2.1GHz) also has about one third the range as LTE on 700 Mhz.

The spectrum advantage seems marginal.

If AT&T truly wanted to improve service, all they have to do is utilize their unused 700MHz and AWS spectrum. That’s over 32Mhz – a 50% improvement over their current 59MHz utilization. It wouldn’t cost them a dime.

• AT&T could also buy another 40 Mhz at 2.6 GHz for less than $2 billion. That would increase their spectrum utilization from the current 59 MHz to 131 MHz (59MHz + 32MHz of current 700/AWS + 40 MHz at 2.6GHz). AT&T could more than double their capacity with greenfield spectrum for 1/20th the cost of the T-Mobile merger.
• In addition, 20MHz spectrum is available at 1.6GHz and 2.1GHz (Mobile Satellite) spectrum.
• SpectrumCo might also be more open to a sale of its 20MHz of AWS-1 spectrum.

Bottom line: For less than $4 billion, AT&T could go from 59MHz of utilized spectrum to over 150 MHz (91 MHz + 40Mhz at 2.6Ghz + 20 Mhz at 1.6GHz). That’s greenfield spectrum for LTE.

AT&T’s shareholders are spending $39 billion of their own money simply to eliminate a competitor. Since demand for spectrum is growing, it seems like a dumb idea.

Related stories on DailyWireless include; Combining AWS and 700 MHz: Why?, AT&T Gets Heat on MediaFLO Spectrum, U.S. Wireless Growth, T-Mobile’s Secret Sauce: 2x10MHz, T-Mobile’s Secret Sauce: 2x10MHz, FCC Finalizes Rules on 700MHz: Limited Open Access, No Wholesale Requirement, Qualcomm Buys Flarion, Joint Commecial/Muni Proposed for 700Mhz, AT&T’s WiFi TV, Hiwire Moves on Mobile TV, Mobile TV War at NAB, Small Ops Squeezed Out of 700MHz?, HiWire: 24 Mobile TV Channels, Rural Broadband Gets A Plan, Verizon Makes its Move for Universal Service Fund, The Smartest Guy in the Room, 700 MHz On The Line?, 700 Mhz Worth $28B, 4G Auctions, RUS Funding for 700 MHz, The 700 Mhz Club, Channel 54: Where are You?,

Posted by Sam Churchill on Friday, April 22nd, 2011 at 8:47 am .