Verizon Wireless (NYSE: VZ) may have scored big in the FCC's recent $45 billion AWS-3 spectrum auction by securing more $10.8 billion in new spectrum in major markets. But one financial analyst believes that the operator is in dire need of more spectrum, because it has over 40 percent of the industry's postpaid customers on its network and controls less than 20 percent of available spectrum.
BTIG analyst Walter Piecyk wrote in a research note that Verizon is preparing to launch an over-the-top video service later this year, and there is some speculation that the company will integrate this with its wireless services. If so, Piecyk says, the company will be increasingly limited by its spectrum position. And even if it uses LTE Broadcast technology to be more spectrally efficient, that technology still uses a "decent chunk of spectrum," so the company will need more spectrum to offer that service wirelessly.
Because of this, Piecyk says that he believes Verizon is the most obvious buyer of spectrum from the secondary market from players such as Dish Network (NASDAQ: DISH) and Sprint (NYSE: S). However, Piecyk admits that the company could run into problems from the FCC's spectrum screen, which the agency uses to evaluate spectrum purchases. Specifically, the FCC does not want any single operator to have more than one-third of usable spectrum in a market. The agency uses the screen to determine whether proposed deals after the auction should be subjected to a more detailed competitive analysis. However, Piecyk notes that the FCC's "definition of usable spectrum can be subjective and inputs of the spectrum screen can be altered with any new proposed transaction."
Piecyk also said that Verizon isn't a shoe-in for buying spectrum from Dish or Sprint. He said that other players, such as AT&T Mobility (NYSE:T) and T-Mobile US (NYSE:TMUS), are also interested in Dish's midband spectrum. And he theorized that all three companies would be more interested in Dish's spectrum than in Sprint's 2.5 GHz spectrum.
In addition, he said that If Verizon proposed a transaction to buy Dish and a portion of Sprint's spectrum, the FCC might be concerned that the scenario would prevent T-Mobile from acquiring any further spectrum.
- see this BTIG report (sub req.)
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