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AT&T spaffs $1.9bn on secondhand cell-phone spectrum

One previous owner, hardly used, to cover 39 more US areas

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AT&T wants to give Verizon $1.9bn, and some lumps of regional radio spectrum, in exchange for a decent chunk of 700MHz to add to its growing portfolio of low-frequency cell-phone network goodness.

Assuming the deal gets FCC approval, by the middle of 2013 AT&T will be able to cover another 39 regions with 700MHz LTE for high-speed mobile broadband.

As part of the agreement, Verizon will get AT&T spectrum covering five US regions and $1.9bn in cash. There's also some complexity involving investment biz Grain Management, which will buy a handful of radio licences from AT&T and then lease them to Verizon, as US operators seek to expand national coverage.

This follows last week's deal in which AT&T spent $780m on spectrum owned by Alltel, along with half a million subscribers, as it continues to unify its 700MHz holdings so customers can travel around the US without having to roam between networks or change handsets.

The majority of countries sell spectrum licences nationally, so network operators buy a lump of radio frequencies to be used anywhere within that specific nation. But the United States is a very big country so it divides up its spectrum licences by region making the whole business a good deal more complicated.

The idea is also to allow smaller networks to compete, although in fact many of them have sold out or are considering their options as the economies of scale become all too evident in the mobile business.

This latest sale was promised by Verizon when it won approval to buy $3.6bn in spectrum from various cable TV companies that had earlier snapped up the airwaves at auction from the FCC. When the ink is dried on this new agreement, Verizon will occupy the top part of 700MHz while AT&T lurks around the bottom. ®

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