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AT&T is back in the M&A game. Compared with some of the US telecoms giant’s previous efforts, its shareholders seem more enthusiastic.
On Tuesday, AT&T said it would buy $23bn worth of spectrum licences from satellite operator EchoStar, whose founder Charlie Ergen has thrown in the towel on creating a fourth national mobile phone operator. This follows AT&T’s earlier $6bn purchase of fibre internet assets from Lumen Technologies, which, like EchoStar, was an overleveraged company that needed to raise cash.
AT&T is no stranger to the acquisition trail. It spent much of the 2010s building a major media empire, spending about $150bn to buy DirecTV and Time Warner. Those proved to be albatrosses. This decade has been about slashing costs, reducing debt, selling assets and sticking to mobile phone services, fibre internet and, over time, creating a product that combines the two. Both the Lumen and EchoStar deals are consistent with this approach and AT&T shares have risen 70 per cent since the start of 2024.
The key question, however, is whether Washington will be on the same wavelength. AT&T, like seemingly every big company doing deals, on Tuesday praised the Trump administration and its telecoms regulator, the Federal Communications Commission, for what it said were forward-thinking policies. Yet the Department of Justice’s antitrust division had earlier this year expressed concerns about the position the big three mobile providers, AT&T, Verizon and T-Mobile, were amassing in spectrum assets.
AT&T has paid a rich price for EchoStar, according to industry multiples that look at spectrum on the basis of population served. One analyst pegged the price as $7bn above its fair value. Another said revenue derived from the spectrum was years away. That suggests AT&T is confident it can squeeze value from future products.
AT&T does have arguments to put to the regulators. While the number of national mobile networks has shrunk, consumers have more options. Cable companies such as Charter and Comcast offer mobile phone services but contract wholesale network capacity from the three biggest operators. EchoStar has a retail brand, Boost Mobile. Rather than using its own network as it originally planned, it will partner with AT&T to rent its infrastructure.
AT&T can also argue that its size and market position will allow it to invest in new products such as wireless internet and better 5G reception in ways that challengers like EchoStar failed to do.
Competition in US telecoms has worked reasonably well, so far. The hundreds of billions of dollars that the Big Three invested in technology have resulted in pretty good products at pretty good consumer prices, if disappointing returns on investor capital. If the carriers can convince regulatory bodies in Washington to back their quest for greater consolidation, consumers may benefit, but shareholders should do even better.
sujeet.indap@ft.com
