T-Mobile befriends its enemy, agrees to swap AWS spectrum with Verizon

Former foes are now good friends. T-Mobile USA, once a passionate opponent to Verizon Wireless' (NYSE:VZ) $3.9 billion proposed purchase of nationwide AWS spectrum from SpectrumCo, a joint venture of cable companies Comcast, Time Warner Cable and Bright House Networks as well as Cox Communications, has agreed to swap a substantial amount of AWS spectrum with Verizon. The spectrum covers 218 markets across the country and both companies said the deal will help their respective LTE network rollouts. Financial terms of the deal were not disclosed.

Up until this point, T-Mobile had been a vocal opponent of Verizon's deals with the cable companies. "Prior to these divestitures, we believed the transaction represented an unfair concentration of spectrum in the hands of the nation's largest wireless carrier," a T-Mobile spokeswoman told FierceWireless. "The significant spectrum divestitures by Verizon announced today are good for competition and consumers."

The move is a big win for Verizon because the deal with T-Mobile includes spectrum that will be purchased in its transactions with SpectrumCo, Cox  and Cricket provider Leap Wireless (NASDAQ:LEAP). Verizon said the deal with T-Mobile is contingent on the closing of those transactions.

The FCC and Department of Justice are reviewing Verizon's $3.9 billion purchase of nationwide AWS spectrum from SpectrumCo and Cox, with a final decision expected by late summer. Verizon has already said it will sell its Lower 700 MHz A and B Block spectrum if the spectrum deals with the cable companies are approved.

Verizon said the T-Mobile exchange includes a number of intra-market spectrum swaps that will result in better use of the AWS spectrum for both companies. The swap will result in an overall net transfer of spectrum from Verizon Wireless to T-Mobile and a cash payment from T-Mobile to Verizon. The license transfers require FCC approval, which Verizon said is expected to receive later this summer.

T-Mobile said the transaction will improve its spectrum position in 15 of the top 25 markets in the United States by giving it the opportunity to acquire additional AWS airwaves and to realign its existing spectrum holdings. T-Mobile said it will be able to quickly use the spectrum for LTE services, which it plans to deploy next year.

T-Mobile said it will gain spectrum covering 60 million POPs--notably in Philadelphia; Washington, D.C.; Detroit; Minneapolis; Seattle; Cleveland; Columbus, Ohio; Milwaukee; Charlotte, N.C.; Raleigh-Durham, N.C.; Greensboro, N.C.; Memphis, Tenn.; and Rochester, N.Y.--in exchange for spectrum covering 22 million POPs and cash.

Verizon already owns substantial AWS holdings east of the Mississippi River, and the spectrum it will get from the cable companies is mainly in the West. Verizon is using its 700 MHz Upper C Block spectrum for its LTE network, which currently covers more than two-thirds of the U.S. population. Verizon plans to use AWS spectrum for LTE services as well, particularly for dense urban areas.

T-Mobile has already received a chunk of AWS spectrum from AT&T (NYSE:T) as part of the $6 billion breakup fee AT&T had to pay to T-Mobile parent Deutsche Telekom, stemming from AT&T's failed $39 billion takeover of T-Mobile. In that spectrum transfer, T-Mobile scored AWS spectrum from AT&T in 128 market areas, including 12 of the top 20 markets in the United States: Atlanta, Boston, Baltimore, Dallas, Denver, Houston, Los Angeles, Phoenix, San Diego, San Francisco, Seattle and Washington, D.C.

For more:
- see this T-Mobile release
- see this Verizon release

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