The largest U.S. wireless provider,
) has completed its swap deal to acquire spectrum from the low-cost
wireless service provider
). The deal was announced in December last year.
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Verizon acquired 23 PCS licenses and 13 Advanced Wireless Service
(AWS) licenses across the U.S. for $120 million. The transaction
will enable Verizon to offer services at a much-higher speed, and
thereby boost its data revenues. The purchase would increase the
current number of Verizon airwaves available for Long Term
Evolution, a 4G network.
The transaction further strengthens Verizon's position against its
Sprint Nextel Corp
), which is a turnaround story, and
), which is still in need of additional airwaves.
The completion of the swap deal was the condition of the Department
of Justice (DOJ) and Federal Communications Commission (FCC) for
approving the purchase of $3.9 million wireless spectrum from a
group of cable companies. Verizon gained all necessary approvals to
buy airwaves from Cox Communications and SpectrumCo, a group of
cable companies including
Time Warner Cable
) and Bright House Networks.
Now, Verizon has to finalize its radio spectrum swap deal with the
fifth largest wireless service provider T-Mobile USA, a unit of
). The deal is expected to be finalized within a month.
We believe the spectrum deals would be accretive to Verizon in the
long term and reshape the overall telecommunication industry when
demand for smartphones is at its peak. But it might put pressure on
the balance sheet in the short term due to reduced cash balances
and increased capital expenditures.
We are maintaining our long-term Neutral recommendation on Verizon.
Currently, the stock retains the Zacks #3 (Hold) Rank for the short
term (1-3 months).