Business

AT&T CEO missed opportunity to beef up wireless network

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Before dropping AT&T’s doomed bid for T-Mobile, AT&T CEO Randall Stephenson missed another big opportunity to beef up his company’s wireless network.

In 2009, Stephenson was aware that a group of cable operators was potentially willing to sell a valuable chunk of advanced wireless spectrum that could be used to build out AT&T’s faster 4G network, a source close to AT&T said.

Instead of pursuing that spectrum, or aggressively building out its own service, Stephenson gambled AT&T’s future two years later on a far riskier deal: a $39 billion takeover of T-Mobile USA.

Last week, Stephenson was forced to abandon that bid in the face of regulatory opposition, dealing a major blow to AT&T, which had pinned its hopes on the deal to boost growth and ease its network constraints.

“They went for the high-risk road instead of a lower-risk option,” the source said.

AT&T spokeswoman McCall Butler said, “We have no comment on the speculation” around the cable spectrum deal.

Adding insult to injury, archrival Verizon this month swooped in with a $3.6 billion offer to acquire the same spectrum, owned by Comcast, Time Warner Cable and Bright House Networks, that AT&T passed on in 2009.

The game-changing deal allows Verizon to race ahead with plans to build out its own 4G LTE network, while AT&T is facing a spectrum crunch and is stepping up costs to upgrade its own network after losing out on T-Mobile.

“Verizon just shut the door on AT&T,” the source said.

Currently, Verizon has 4G LTE service that covers areas with more than 200 million Americans.

In comparison, AT&T has launched 4G LTE in five cities covering 70 million people, including New York City, this month.

While AT&T yesterday gained regulatory approval to buy about $2 billion worth of spectrum from Qualcomm, it will take months to put the spectrum to work, the source said.

If AT&T had bought the cable-owned spectrum, it would have been able to launch service covering more than 300 million Americans, the source said.

While declining to say whether it looked at buying the cable-owned spectrum, AT&T took issue with the notion that the spectrum would have eased its network constraints.

“The spectrum was not built out and eliminated potential to create enhanced capacity,” Butler said. “So to say we would have had enough spectrum if we bought [it] is not accurate.

“By contrast, T-Mobile included towers and networks. There were unique network efficiencies that could only have arisen from integrating AT&T and T-Mobile. So these were two very different value propositions.”

AT&T does have significant spectrum that it has not deployed and could be used to expand its 4G LTE service.

“We’ll continue to squeeze the maximum capacity out of our current spectrum until we can obtain more,” Butler said.

“We have the spectrum needed to get to 80 percent of the country” by the end of 2013.