Qualcomm and AT&T Spectrum Sale Highlights Value Elsewhere (QCOM, T, S, CLWR)

Qualcomm Incorporated (NASDAQ: QCOM) has found a new way to raise cash, in part out of a product flop.  The company has announced the sale of licenses it holds for 700 megahertz spectrum here in the United States to AT&T Inc. (NYSE: T) for $1.93 billion.  The implication of this transaction is far from just helping AT&T boost its spectrum.  The deal could bring more focus to the other companies which hold excess spectrum.

Unfortunately the sale is to utilize the spectrum it needed for its “Flo” wireless TV service it is shutting down.  The spectrum is 12 megahertz and it covers the top 15 metro areas in the U.S., and is also 6 megahertz which covers 230 million potential subscribers in other parts of the country.

AT&T will deploy the spectrum as supplemental downlink to deliver capacity gains.  It will begin deploying the spectrum once compatible handsets and network equipment are developed.  Qualcomm will provide technology for the supplemental downlink in chipsets and AT&T will use Qualcomm’s technology.

AT&T wins here in added spectrum.  If you are in or around New York City you already know that is needed.

The real gain here may actually be highlighting a competitor. This once again establishes a value for Spectrum, and that in turn highlights Sprint Nextel Corp. (NYSE: S) with ist giant spectrum held and even Clearwire Corporation (NASDAQ: CLWR).  The 4G wireless spectrum has been considered the Hioly Grail for wireless carriers, but the problem is the capital spending needed to boost that spectrum into products with mass appeal that customers will open their wallets up for.

Sprint has been trying to find ways to dial back its cap-ex spending and Clearwire recently announced that it was raising capital outside of Sprint.

Qualcomm shares are trading above $50.00 again after a $49.46 close on Friday, while AT&T shares are up around $29.35 versus a $29.21 close on Friday.  Sprint shares are up 1.2% at $4.21 in pre-market trading and Clearwire is up around $5.30 in very light volume after a $5.21 close on Friday.

The initial thought is that this gives AT&T a leg up.  The after-thought is that this also highlights the value of spectrum held by competitors.

JON C. OGG