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AT&T To Buy Qualcomm's FLO TV Spectrum For $1.9 Billion

AT&T plans to buy spectrum licenses in the 700-MHz band from Qualcomm -- which is shutting down its failed FLO TV mobile TV venture -- in a deal worth $1.925 billion.

Qualcomm currently uses the licenses to support FLO TV. But after signing up only about 1 million subscribers, through AT&T, Verizon Wireless and its own direct-to-consumer service, the company this fall decided to shut down the business and network on March 27, 2011.

AT&T expects to use the licenses to enhance its next-generation 4G wireless broadband services. The spectrum covers more than 300 million people total nationwide and comprises: 12 MHz of Lower 700 MHz D and E block spectrum covering more than 70 million people in five of the top 15 U.S. metropolitan areas -- New York, Boston, Philadelphia, Los Angeles and San Francisco; and 6 MHz of Lower 700 MHz D block spectrum covering more than 230 million people across the rest of the U.S.

AT&T said it intends to use "carrier aggregation" technology to deploy the spectrum as a supplemental downlink for its longer-term 4G network rollouts. The telco expects to begin using the spectrum once compatible handsets and network equipment are developed.

For its part, Qualcomm intends to integrate carrier aggregation technology into its chip-set roadmap to enable supplemental downlink and intends to market the technology globally. Qualcomm also plans to develop LTE multicast technologies to deliver high-bandwidth video and other multimedia content.

"This is a positive outcome for Qualcomm and our stakeholders," Qualcomm chairman and CEO Paul Jacobs said in announcing the deal. "Carrier aggregation, supplemental downlink and LTE multicast technologies are an exciting evolution of next generation wireless systems to economically support increasing consumer demand for mobile TV and other rich media content."

AT&T and Qualcomm anticipate closing the sale during the second half of calendar year 2011, subject to regulatory approvals and other customary closing conditions. Qualcomm said it will receive the proceeds at closing.

Qualcomm's restructuring charges related to the FLO TV service business were previously estimated to be in the range of $125 million to $175 million in fiscal 2011, primarily related to certain contractual obligations. As a result the AT&T agreement Qualcomm anticipates additional charges will be incurred related to the shutdown of the FLO TV network and associated business exit costs.