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5/11/2009
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AT&T Offering Phones, BlackBerrys On Rural Spectrum

The 1.5 million subscribers AT&T will acquire from Verizon Wireless will be switched to AT&T's GSM network within a year of the acquisition's completion.

AT&T announced that the 1.5 million subscribers it will acquire from Verizon Wireless will be shifted from Verizon's CDMA network to AT&T's GSM network within 12 months of the deal's completion. The assets were previously owned and managed by Alltel, which was acquired by Verizon Wireless earlier this year for $28.1 billion.

AT&T, which will pay $2.35 billion for the assets, said it will spend another $400 million on the switchover. The AT&T-Verizon deal is expected to close in the fourth quarter of 2009, AT&T said.

Subscribers in the mostly rural regions will be able to receive mobile broadband on AT&T smartphones, including iPhones and BlackBerry Bolds, after the transition is completed, the company indicated in an announcement late Friday. In a smaller deal in the wireless-infrastructure musical chairs exercises between the two largest U.S. wireless carriers, AT&T said it will sell some wireless assets of Centennial Communications to Verizon Wireless.

"Deals like this are not uncommon after a big deal like Verizon's acquisition of Alltel," said Joe Nordgaard, managing director of wireless consultancy Spectral Advantage, on Monday. "It's done to placate the concerns of regulatory bodies." Previously, the FCC had earmarked scores of regions in which one or another company was deemed to be too dominant after acquiring additional assets.

Private equity groups, including Blackstone Group and Kohlberg Kravis Roberts, had also submitted bids for the Verizon Wireless assets, according to media reports.

The Verizon Wireless assets that AT&T is picking up are located in 79 mostly rural areas in Alabama, Arizona, California, Colorado, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, Tennessee, Utah, Virginia, and Wyoming. The Centennial assets, which serve some 120,000 subscribers, are primarily located in Louisiana and Mississippi. Verizon Wireless has agreed to pay AT&T $240 million for those assets.

By reporting that the switchover to its GSM network won't take place for several months -- likely in the fourth quarter of 2010 -- AT&T may be indicating it will stick with its 3G broadband network for an indefinite period before it switches to Long Term Evolution 4G technology.

In its announcement, AT&T trumpeted its international GSM reach as well as its Wi-Fi network, which it said has some 80,000 global locations.

"Wireless continues to be AT&T's greatest growth driver, and this transaction will complement our existing network coverage, particularly in rural areas," said Ralph de la Vega, president and CEO, AT&T mobility and consumer markets. "The acquisition will add network assets, distribution channels, and 850-MHz spectrum in a significant portion of the U.S."


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