Qualcomm Inc. has held talks with AT&T Inc. over the possible sale of spectrum the chipmaker acquired for its mobile-television service, according to two people with knowledge of the discussions.
Qualcomm paid $683 million for rights to use the 700 megahertz spectrum in federal auctions between 2003 and 2008, and started Flo TV in 2004 to allow users to watch broadcast TV on their mobile phones. The San Diego-based company suspended sales of Flo TV after it struggled to attract subscribers.
Qualcomm Chief Executive Officer Paul Jacobs said in an interview Nov. 16 he is considering a range of options for the Flo TV business, including putting it in a joint venture or shutting it down and selling the spectrum.
The company has spoken with several carriers, including AT&T, said one of the people, without providing specifics. Verizon Wireless, the country’s largest wireless operator, and T-Mobile USA are not currently in talks with Qualcomm, according to two people with knowledge of the situation.
The spectrum could fetch as much as $1 billion, according to an Oct. 6 valuation by Mark McKechnie, a Gleacher & Co. analyst in San Francisco. The spectrum covers the U.S. in 6 megahertz blocks, McKechnie said.
“It’s got to be worth more now; they got that spectrum before the iPhone came out,” said McKechnie in an interview, referring to the Apple Inc. smartphone.
AT&T is upgrading its existing third-generation network to allow for higher speeds while it works on building out its fourth-generation network to debut next year. Many carriers are seeking additional spectrum to help relieve capacity constraints as more users adopt data-hungry smartphones.
Flo TV Exit
“We are in discussions with a variety of interested parties and are continuing to evaluate other options,” said Bill Davidson, Qualcomm’s senior vice president of investor relations, while declining to name any of the companies. Michael Buckley, an AT&T spokesman, said the company doesn’t comment on speculation.
Qualcomm said this month it expected to incur charges of between $125 million and $175 million in fiscal 2011 to exit the Flo TV business. It will likely maintain the network until next spring so that subscribers can still receive the service.
AT&T, based in Dallas, gained 48 cents, or 1.7 percent, to $28.44 at 4 p.m. in New York Stock Exchange composite trading and has increased 1.5 percent this year. Qualcomm dropped 26 cents to $47.72 in Nasdaq Stock Market trading and added 3.2 percent this year.