As per a Bloomberg report on Dec 18, leading telecom carrier,
Verizon Communications Inc.
) is reportedly swapping spectrum with
T-Mobile US Inc.
). According to a Federal Communications Commission (FCC) filing,
both these companies are reportedly exchanging airwaves license
in 518 U.S. counties covering about 133 cities and towns.
The deal involves exchange of advanced wireless service (AWS)
and personal communications service spectrum. We believe the move
will allow both the companies to beef up their spectrum holding
in key coverage areas as well as streamline unprofitable assets
in the form of unused airwaves.
The news failed to see much reaction in the market. The
prices did not register much change and closed at $48.43 on
Thursday closing. However, T-Mobile USshares grew around 9% to
$29.61 on Thursday closing in comparison to $27.25 at Wednesday's
According to the FCC filing, Verizon and T-Mobile are
exchanging 10-20 MHz of AWS-1 spectrum in 285 counties across 59
markets. In terms of AWS swaps, Verizon would provide 10 MHz of
AWS spectrum to T-Mobile in 16 counties across four cellular
markets. In exchange, T-Mobile would assign 10-20 MHz of AWS
spectrum to Verizon in 26 counties across nine cellular
With respect to PCS spectrum exchange, both the companies
would exchange 5-20 MHz of PCS spectrum covering 153 counties
across 47 markets. Additionally, Verizon would assign 20 MHz of
PCS spectrum to T-Mobile in 11 counties across three cellular
markets in Texas and receive 10 MHz of PCS spectrum in exchange.
Going forward, Verizon will also offer 5-10 MHz of PCS spectrum
in 34 more counties across 13 cellular markets to T-Mobile.
According to the news report, Verizon has struck a separate
agreement with T-Mobile US for swapping these spectrums other
than its existing deal to sell its 700-megahertz A-block spectrum
to T-Mobile US Inc. According to news reports, Verizon spent
around $2.4 billion for acquiring these spectrums covering 150
million POPs and company's willing to repurchase these from
Verizon have to strike an at par deal if not more.
Spectrum crunch has become the major issue in the U.S. telecom
industry that has a saturated wireless market. Most of the
carriers are finding it increasingly difficult to manage mobile
data traffic, which is growing by leaps and bounds. The situation
has become even more acute with the growing popularity of
) iPhone and
) Android-based smartphones as well as rising online mobile video
streaming, cloud computing and video conferencing services. We
believe the new spectrum exchange between companies and new
auction by FCC will likely open up new channels for the companies
to address airwaves shortage and issues related to it.
Verizon has a Zacks Rank #3(Hold).
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