AT&T readying itself for divestures, approval of T-Mobile deal, says report

AT&T has hired Bank of America Merrill Lynch to help find buyers for some of its customers and wireless spectrum, valued at approximately $8 billion, the Wall Street Journal has reported.

Since AT&T first proposed purchasing smaller rival T-Mobile from Deutsche Telekom for $39 billion, analysts have suggested that the selling-off of such assets — as a criticism of the deal is that it will give AT&T too much power, crushing any true market competition — would be necessary to gain the approval of hesitant regulators.

An AT&T spokesperson told the paper that speculation about the value of divestitures is "premature." While the report adds that analysts believe the deal is "far from guaranteed," AT&T CFO Pete Ritcher said at a tech conference this week that AT&T is "very confident that the deal is going to be approved," and that nothing in the review process has come as a surprise. (CP: AT&T to launch LTE with data cards and the like this summer)

AT&T's position on the deal is that it would provide it with much-needed spectrum. With mobile data volumes having increased 8,000% from 2007 to 2010 — thanks in part to its exclusive hold on the Apple iPhone — AT&T has stated in press materials that it "faces network capacity constraints more severe than those of any other wireless provider."

It additionally argues that the acquisition will enable it to deploy LTE to 97.3% of the U.S. population, which it believes will "connect every part of America to the digital age" and help to create new jobs and economic growth in rural communities. (ABI Research's Phil Solis has poked a hole in this latter bit, pointing out that Verizon plans to cover its entire 3G footprint with LTE by 2013.)

A document reportedly posted to the FCC site by mistake shows that T-Mobile acquisition would also make for some more efficient spending on its part. Prior to eyeing T-Mobile, AT&T had planned to rollout LTE to just 80% of the country. According to the document, reports Wireless Week, expanding beyond 80% would cost AT&T $3.8 billion in additional expenditures.

"AT&T senior management concluded that, unless AT&T could find a way to expand its LTE footprint on a significantly more cost-effective basis, an LTE deployment to 80% of the U.S. population was the most that could be justified," AT&T council Richard Rosen states in the document, according to the report.

However, by purchasing T-Mobile, the document continues, the cost of the LTE expansion would have a greater revenue base, helping AT&T to "better absorb the increased capital investment and lower returns associated with deploying LTE to over 97% of the U.S. population."

The document also included details about AT&T's network upgrades. According to Richter, the rate of AT&T's planned LTE expansion in 2012 will depend on approval of the T-Mobile deal. The document, however, lays out a plan to upgrade "44,000 nodes to LTE over the next two years, including 8,000 nodes this year, 16,000 nodes next year and 20,000 nodes in 2013."

An AT&T spokesperson commented that the document, which was quickly pulled from the FCC site, offered no real news, only confirmation of AT&T's commitment to rolling out 4G LTE to 97% of the country.