Verizon Wireless (NYSE:VZ) is nearing a deal to sell its lower 700 MHz A Block spectrum to T-Mobile US (NYSE:TMUS), according to a Bloomberg report. The report, which cited an unnamed person close to the deal, said that the deal could be announced as soon as this week.
Verizon Communications CEO Lowell McAdam has indicated that the company would be open to a spectrum swap to get a deal done, and Verizon executives in general have been open about their willingness to part with the A Block at the right price. Verizon paid $2.4 billion for its A Block licenses, and companies interested in buying the spectrum would likely need to pay that much if not more, according to analysts. The spectrum covers around 150 million POPs, according to the report.
Verizon and T-Mobile declined to comment, according to the report.
T-Mobile raised $3.8 billion in debt and stock sales last month to increase its war chest for spectrum and is reportedly interested in Verizon's A Block spectrum holdings. In securities filings, T-Mobile has said it is interested in "opportunistically acquiring additional spectrum in private party transactions" and also that it wants low-band spectrum.
T-Mobile COO Jim Alling said last week at an investor conference that the carrier is "opportunistic when it comes to anything that could be available to improve our spectrum holdings," and that "low-band spectrum is very important for us." T-Mobile is the largest holder of mid-band AWS spectrum, which it is using to deploy its LTE network. Verizon acquired nationwide AWS holdings last year from a group of cable companies, and is using those airwaves to add extra capacity to its existing 700 MHz C Block LTE network.
Earlier this month the Wall Street Journal reported that AT&T (NYSE:T) is considering buying Verizon's A Block spectrum, which could set up a bidding war between AT&T and T-Mobile. However, it's unclear how interested AT&T actually is in buying the airwaves.
New Street Research analyst Jonathan Chaplin wrote in a research note that T-Mobile has excess AWS spectrum, which he valued at around $400 million. Verizon could use those airwaves to fill in gaps in its own AWS holdings. Chaplin suggested that if T-Mobile's excess AWS spectrum was included in a deal with Verizon, the deal value would be around $2 billion to $2.5 billion. Chaplin also wrote that T-Mobile would then likely seek to score other 700 MHz A Block licenses from carriers besides Verizon, which could cost an additional $1.6 billion to $2 billion.
"We believe both Verizon and TMUS are focused on having 40 MHz of AWS spectrum across major markets," Chaplin wrote. "Verizon has less than 40 MHz of spectrum across 95 million POPs in the top 100 markets (49% of POPs in the top 100 markets). Within these markets, TMUS has spectrum covering 37 million POPs, or 40% of Verizon's gap"
- see this Bloomberg article
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