Telecom giant AT&T (T 1.47%) struck a deal with EchoStar on Tuesday to acquire wireless spectrum licenses that cover nearly ever market across the U.S. The company will pay $23 billion for 30 MHz of mid-band spectrum and 20 MHz of low-band spectrum. AT&T plans to deploy these licenses as soon as possible, bolstering its 5G network. The transaction is expected to close in mid-2026.
AT&T will finance this hefty deal with a combination of cash on hand and additional borrowings. The company's net-debt-to-adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio will increase as a result, but AT&T expects to be back at its target level within about three years. This deal won't impact AT&T's capital return plans, which include $20 billion for share repurchases through 2027.
Why is AT&T spending so much on additional spectrum? It's all about the company's convergence strategy.
Image source: Getty Images.
The most valuable customers
AT&T's wireless subscribers are loyal. Postpaid phone churn was just 0.87% in the second quarter of 2025, an indication that wireless customers are generally sticking with the company.
Even more loyal are customers who pay for both wireless service and AT&T's fiber internet service. These so-called converged customers have lower churn and high lifetime value than nonconverged customers. A key part of AT&T's strategy is to grow the number of converged customers.
At the end of the second quarter, AT&T had just over 4 million customers with both wireless and fiber services. That works out to just over 40% of fiber customers also subscribing to a wireless plan. Expanding the fiber network to new areas is critical for growing the number of converged customers, but so is making sure fiber customers find AT&T's wireless offerings appealing compared to the competition. This $23 billion wireless spectrum deal helps with the second part.
Along with the announcement of the deal, AT&T reiterated its plans to greatly expand its fiber network over the next few years. AT&T's fiber network currently passes more than 30 million locations, and the plan is to reach 50 million locations directly by the end of 2030, and another 10 million locations through fiber assets recently acquired from Lumen and from its Gigapower joint venture. The expected doubling of the fiber network over the next five years will give the company more opportunities to win converged customers.
The spectrum deal will also help with AT&T's Internet Air business, which provides home and business internet via its 5G network. Internet Air allows AT&T to win internet customers in areas where fiber is not yet available, then transition those customers to fiber later on. The service also targets areas where AT&T won't reach with its fiber network, providing an alternative to legacy services. AT&T currently has more than 1 million Internet Air customers.
While the $23 billion price tag is certainly steep, acquiring new spectrum adds fuel to AT&T's convergence strategy and should help the company grow its revenue and free cash flow in the years ahead.
Still a solid buy
AT&T stock has surged over the past year, but it's still reasonably priced. The company expects to generate free cash flow of at least $16 billion in 2025, which puts the price-to-free cash flow ratio just over 12. Free cash flow is then expected to top $18 billion in 2026 and $19 billion in 2027.
AT&T is leaning into a winning strategy with its $23 billion spectrum deal. As the company wins more converged customers by expanding its fiber network and improving its 5G coverage, the stock can keep moving higher along with revenue and free cash flow.
