Verizon Wireless picks up AWS licenses from cable operators for cool $3.6B; Sprint Nextel left in the cold?
Verizon Wireless (VZ)
bolstered its spectrum war chest today by announcing plans to acquire
122 1.7/2.1 GHz spectrum licenses (also known as AWS spectrum) covering
259 million potential customers for $3.6 billion from a consortium of
cable companies. The deal also allows for the cable companies to sell
Verizon Wireless’ services on a wholesale basis and for all parties to
work on the development of technology integrating wireline and wireless
products and services.
The spectrum portion of the agreement, which includes 20 megahertz of spectrum per license, will inflate Verizon Wireless’ already robust AWS spectrum holdings, which the carrier plans to use to beef-up its LTE network that currently relies on 700 MHz spectrum. For the cable companies, the deal provides a significant return on the $2.4 billion they spent on 137 AWS spectrum licenses in the 2006 auction. Verizon Wireless picked up 13 AWS licenses that included 12 megahertz of spectrum per license covering 192 million pops for $2.8 billion during the auction.
As part of the deal, Comcast will receive $2.3 billion from the sale for its 63.6% stake in the venture; Time Warner Cable will pocket $1.1 billion for its 31.2% stake; and Bright House Networks will take home $189 million for its 5.3% stake. The deal also removes upcoming build-out requirements for the spectrum that if not fulfilled could have resulted in the Federal Communications Commission revoking the licenses.
When originally acquired, Comcast let it be known that it was really not interested in building out the spectrum assets in the near term. Other cable operators have had a similar hands-off approach to their wireless spectrum assets, including Cox Communications’ recent announcement that it was pulling its plans to launch a mobile network.
The sale could prove a loss for Sprint Nextel, which to this point has had a close relationship with the cable operators. Sprint Nextel originally had a small ownership stake in the SpectrumCo venture before pulling out following the AWS auction. The carrier also was part of the eventually doomed Pivot venture that was to see the cable providers resale Sprint Nextel’s wireless service as well as a more recent investments in Clearwire that has seen some cable providers offer mobile broadband services running across the Sprint Nextel subsidiary’s WiMAX network.
Comcast was rather oblique in comments following the Verizon Wireless deal, choosing to not mention its Sprint Nextel/Clearwire arrangement in a prepared statement.
“These agreements, together with our Wi-Fi plans, enable us to execute a comprehensive, long-term wireless strategy and expand our focus on providing mobility to our Xfinity services,” said Neil Smit, president of Comcast Cable. “We’re excited about this partnership with Verizon Wireless and the future innovations we will bring to consumers.”
The most honest comment was provided by Time Warner Cable President and COO Rob Marcus, who noted in a prepared statement: “We’re also pleased to have obtained an attractive price for the spectrum we’re selling.”
The deal also comes at a time when Verizon Wireless’ largest rival AT&T Mobility is trying to bolster its spectrum holdings through a contentious attempt to purchase T-Mobile USA, which was the big spender during the AWS auction. Like Verizon Wireless, AT&T Mobility has said it plans to use the AWS spectrum assets to bolster its LTE deployment.
Analysts noted that since the AWS spectrum is currently not being used by another party, the FCC should look favorably on the deal, though there might be some concern regarding how long Verizon Wireless will sit on this spectrum before putting it to use.
“The obvious question is will the FCC approve this deal as there has been a large outcry by smaller industry players that [AT&T] and [Verizon] have dominant spectrum positions,” noted Wells Fargo Securities in a research note. “Unlike [AT&T]/T-Mobile, which is taking out a competitor, we believe the FCC will look at this transaction with a kinder eye as this is ‘naked’ spectrum and essentially does not change the competitive landscape for the wireless industry. … Last, we note that many spectrum experts have indicated the FCC does not typically allow for ‘spectrum warehousing’ in this industry. Put simply, it would be difficult to approve a deal if [Verizon] were to just sit on this spectrum. While [Verizon's] stated need for spectrum had been by 2015, we believe today’s move shows the need is possibly more urgent given the heavy demands of wireless data.”
Verizon Wireless is also attempting to swap spectrum with Leap Wireless where it will exchange a 700 MHz license covering Chicago for 36 AWS and 1.9 GHz spectrum licenses covering parts of 16 states.
The spectrum portion of the agreement, which includes 20 megahertz of spectrum per license, will inflate Verizon Wireless’ already robust AWS spectrum holdings, which the carrier plans to use to beef-up its LTE network that currently relies on 700 MHz spectrum. For the cable companies, the deal provides a significant return on the $2.4 billion they spent on 137 AWS spectrum licenses in the 2006 auction. Verizon Wireless picked up 13 AWS licenses that included 12 megahertz of spectrum per license covering 192 million pops for $2.8 billion during the auction.
As part of the deal, Comcast will receive $2.3 billion from the sale for its 63.6% stake in the venture; Time Warner Cable will pocket $1.1 billion for its 31.2% stake; and Bright House Networks will take home $189 million for its 5.3% stake. The deal also removes upcoming build-out requirements for the spectrum that if not fulfilled could have resulted in the Federal Communications Commission revoking the licenses.
When originally acquired, Comcast let it be known that it was really not interested in building out the spectrum assets in the near term. Other cable operators have had a similar hands-off approach to their wireless spectrum assets, including Cox Communications’ recent announcement that it was pulling its plans to launch a mobile network.
The sale could prove a loss for Sprint Nextel, which to this point has had a close relationship with the cable operators. Sprint Nextel originally had a small ownership stake in the SpectrumCo venture before pulling out following the AWS auction. The carrier also was part of the eventually doomed Pivot venture that was to see the cable providers resale Sprint Nextel’s wireless service as well as a more recent investments in Clearwire that has seen some cable providers offer mobile broadband services running across the Sprint Nextel subsidiary’s WiMAX network.
Comcast was rather oblique in comments following the Verizon Wireless deal, choosing to not mention its Sprint Nextel/Clearwire arrangement in a prepared statement.
“These agreements, together with our Wi-Fi plans, enable us to execute a comprehensive, long-term wireless strategy and expand our focus on providing mobility to our Xfinity services,” said Neil Smit, president of Comcast Cable. “We’re excited about this partnership with Verizon Wireless and the future innovations we will bring to consumers.”
The most honest comment was provided by Time Warner Cable President and COO Rob Marcus, who noted in a prepared statement: “We’re also pleased to have obtained an attractive price for the spectrum we’re selling.”
The deal also comes at a time when Verizon Wireless’ largest rival AT&T Mobility is trying to bolster its spectrum holdings through a contentious attempt to purchase T-Mobile USA, which was the big spender during the AWS auction. Like Verizon Wireless, AT&T Mobility has said it plans to use the AWS spectrum assets to bolster its LTE deployment.
Analysts noted that since the AWS spectrum is currently not being used by another party, the FCC should look favorably on the deal, though there might be some concern regarding how long Verizon Wireless will sit on this spectrum before putting it to use.
“The obvious question is will the FCC approve this deal as there has been a large outcry by smaller industry players that [AT&T] and [Verizon] have dominant spectrum positions,” noted Wells Fargo Securities in a research note. “Unlike [AT&T]/T-Mobile, which is taking out a competitor, we believe the FCC will look at this transaction with a kinder eye as this is ‘naked’ spectrum and essentially does not change the competitive landscape for the wireless industry. … Last, we note that many spectrum experts have indicated the FCC does not typically allow for ‘spectrum warehousing’ in this industry. Put simply, it would be difficult to approve a deal if [Verizon] were to just sit on this spectrum. While [Verizon's] stated need for spectrum had been by 2015, we believe today’s move shows the need is possibly more urgent given the heavy demands of wireless data.”
Verizon Wireless is also attempting to swap spectrum with Leap Wireless where it will exchange a 700 MHz license covering Chicago for 36 AWS and 1.9 GHz spectrum licenses covering parts of 16 states.
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