Will AT&T (T) Boost its 5G Presence with FiberTower Buyout?

U.S. telecom behemoth AT&T Inc.T is leading in the 5G market, zooming ahead of the three other wireless carriers - Verizon Communications Inc. VZ , Sprint Corp. S and T-Mobile US TMUS - that are also gearing up for 5G launch this year. To this end, according to a recent report by FierceWireless on Feb 1, AT&T has decided to acquire FiberTower and its millimeter wave (mmWave) spectrum assets as part of its 5G network strategy.

The financial terms of the deal have been kept under wraps.

This latest news came up when AT&T was busy promoting its project AirGig by entering into different discussions with multiple electric utilities and other companies to test Project AirGig technology in two areas. Project 'AirGig' is an initiative that uses power lines to guide wireless signals through antennas placed on utility poles.


FiberTower holds an extensive footprint of mmWave spectrum in the 24 GHz and 39 GHz bands (covering around 30 towns and cities in the U.S.), formally known as Local Multipoint Distribution Service (LMDS) bands and used for fixed wireless services. The company also has some fiber and microwave assets. Notably, FiberTower was known for its backhaul services that it provided to wireless operators. However, the company is in bankruptcy since Jul 2012 when it suffered $527 million in debt due to the loss of business with big players like AT&T.

The 39GHz is one of the four high bands identified by the U.S. telecom regulator, Federal Communications Commission (FCC), as a future 5G band. Moreover, the mmWave spectrum is assumed to be one of the building blocks of 5G, offering the speed and capacity to allow users to do things like download an HD movie in seconds.

AT&T's Plans

AT&T claims that it has already started deploying small cells using Centralized RAN (C-RAN) architecture in San Francisco and aims to repeat this deployment in other cities as well. We believe such strategic efforts will help AT&T densify its network and expedite the layout of 5G. The acquisition of FiberTower should be a big step toward the company's 5G goal.

The move is strategically similar to Verizon's decision to purchase XO Communications Inc.'s fiber-optic network for $1.8 billion. On Feb 1 itself, Verizon also completed its XO Communications buyout which will expand its metro and on-net fiber network by using the fiber assets of the latter. Verizon will also lease the mmWave spectrum holdings of XO with an option to buy those leases in 2018.

Over the past three months, AT&T's stock has returned 15.62%, while the Zacks categorized Wireless National industry has gained 13.99%.

AT&T currently carries a Zacks Rank #3 (Hold).You can see the complete list of today's Zacks #1 Rank (Strong Buy)stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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