4G phone service: More spectrum for AT&T in 2011

4G phone service from AT&T, expected to be offered next year, will have more capacity with purchase of Qualcomm spectrum.

Eric Thayer/Reuters/File
A customer looks at an iPhone 4 at the Apple Store 5th Avenue in New York in June. AT&T, which provides iPhone service, expects to offer next-generation 4G phone service next year. On Dec. 20, it announced that it was buying additional capacity from Qualcomm for its high-speed service. 24, 2010.

AT&T Inc. will buy $1.93 billion worth of wireless spectrum from Qualcomm Inc. to add capacity to its forthcoming high-speed 4G phone service, the companies said Monday.

Qualcomm, based in San Diego, has used the spectrum for its FLO TV service, which allows subscribers to watch 10 to 15 channels of live television on cell phones. Qualcomm will shut down the service in March because of weak interest from consumers. Only a few phones and standalone portable TV sets are capable of receiving the signals. In the latest quarter, running FLO TV cost the company $132 million.

However, Qualcomm stands to make a handsome profit on the spectrum. It paid $38 million for one slice of nationwide spectrum — the former UHF channel 55 — in 2002, then another $558 million in 2008 for UHF channel 56 over New York, Los Angeles, Boston, Philadelphia, and San Francisco.

The purchase will allow AT&T, the second largest cell phone company in the U.S., to bolster its fourth-generation, or "4G" network, whose higher speeds will make loading video and websites on phones faster. AT&T already has spectrum close to the band it's buying from Qualcomm, and has been planning to use it for 4G services starting next year.

The deal is expected to close in the second half of 2011.

Competing cell phone companies, such as Sprint Nextel Corp. (through its Clearwire Corp. subsidiary) and Verizon Communications Inc. have already begun rolling out their next-generation networks, putting pressure on AT&T to catch up.

FLO TV, meanwhile, has been a blemish on Qualcomm's otherwise strong record recently. It's benefiting from the adoption of "3G" networks across the world, and the adoption of "smart" phones. The company also expects to take a bite out of the tablet computer market as consumer electronics makers scramble to develop products that can compete with Apple Inc.'s iPad.

Shares of AT&T Inc. fell 9 cents to $29.12 in morning trading, while Qualcomm shares fell 10 cents to $49.36. Both stocks are cents away from their 52-week highs.

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