Analysts still backing FirstNet/Verizon partnership 'conspiracy theory'

After an Oct. 19 webinar hosted by FirstNet that laid out its key criteria in selecting a partner, analysts from Evercore ISI are standing by their prediction that Verizon (NYSE: VZ) could partner with FirstNet.

Jonathan Schildkraut, senior managing director of equity research at Evercore, said the parameters laid out in the FirstNet webinar reinforced his "conspiracy theory" from this March that Verizon would be best suited to take on the FirstNet network, especially after FirstNet's announcement that it would only be considering national deployments.

Schildkraut said his bets are placed on Verizon for a variety of reasons, perhaps most importantly its existing spectrum.

"Verizon has said, 'We are much more inclined to add incremental spectrum in bands where we have spectrum than to go out into new bands,'" Schildkraut said, referencing Verizon's recent earnings call. "They're talking down their involvement in 600 MHz."

Verizon's existing 700 MHz spectrum is compatible with the public safety network's upper 700 MHz block spectrum, Schildkraut pointed out. In addition, he reinforced his previous speculation that Verizon's underbuying in the AWS-3 spectrum auction left the carrier "in need of more spectral capacity," adding that Verizon may overbuy in the FCC's upcoming 600 MHz auction as a means of selling to Sprint (NYSE: S) and T-Mobile US (NYSE:TMUS) in exchange for AWS-3.

In addition, Schildkraut said Verizon would be the most logical partner for FirstNet because of its existing work with the federal government, its "well-developed rural partnership program," and its nationwide performance. "When you look across the entire country, the network that works the best in the most places consistently is Verizon," Schildkraut said.

This would be important for FirstNet, he added, because he believes it's likely a carrier partner will need to cover the vast majority of the U.S. While states have the ability to opt out of FirstNet's network, requirements for doing so laid out during the webinar were stringent enough that he believes few states will choose to deploy their own compliant network.

Schildkraut's "conspiracy theory" initially came about after American Tower's expensive acquisition of Verizon towers earlier in the year, following which the tower company's CFO alluded to the idea that the sites would be well-suited for a public safety network.

FirstNet's acting Chief Technology Officer, Jeff Bratcher, said earlier this month that he had no comment on specific carriers that the network may partner with, as FirstNet's final Request for Proposals (slated for completion at the end of this year) will be open to all participants. At press time, Verizon had not responded to requests for comment.

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