What is the wholesale value of a prospective wireless customer worth?
I have been hunting for an update to this stat for some time and with the news this week that AT&T is to Buy Qualcomm’s Spectrum for $1.93 Billion we discover that AT&T is paying 87 cents per potential customer for the estimated 300 Million potential customers covered by the spectrum, a standard industry valuation.
AT&T is buying the US bandwidth to accommodate the increase in demand for wireless data. Qualcomm is selling the spectrum because of the lack of customer demand for its on demand wireless media (i.e. FLO TV) business.
Of course the news would have been far more interesting if Facebook, Yahoo! or Google had stepped up and acquired the unwanted spectrum. It looks like – for now at least – it will be left to the telcos to own and operate the “dumb” pipes.
The $0.87 figures provides us with a deeper understanding of the economics of the Telco Industry and just how much the spectrum plays in the total customer acquisition costs. The answer being negligible compared to the mobile handset subsidies and the CAPEX required to build the wireless network.
This of course wasn’t always the case. When we look back at what happened at the turn of the decade Telcos in Europe were paying multiples of 50x to 100x the AT&T acquisition price to acquire wireless spectrum for their 3G networks. If you take the time to read Paul Starr’s The Great Telecom Implosion (Circa 2002) you will discover that the US Telcos have a history of over investment in new technologies.
This over investment in spectrum was one of the primary reasons Europe, the US and Australia was so late to embrace the next wave of the MobCon (See How Japan leveraged the MobCon to jump past Silicon Valley). Of course the costs associated with this delay are now being off-set by the explosion of disruptive new US entrants into the Global MobCon value chain (Think: Apple and Google). As I have said before sometimes there are significant benefits in being the late adopter.
