Spectrum purchase has become a wireless game changer. The
carriers are in need of additional airwaves to expand their
high-speed services and support 4G LTE mobile broadband services.
As a result, the wireless industry is intent on tapping unused
spectrums to expand their capacity in 2012.
The U.S. wireless leader Verizon Wireless plans to swap radio
spectrum from the fifth largest wireless service provider T-Mobile
USA, a unit of
). Verizon Wireless is a joint venture of
Verizon Communications Inc.
Vodafone Group Plc
Per the deal terms, T-Mobile will gain access to spectrum
covering 60 million Americans in exchange for spectrum covering 20
million Americans and an undisclosed cash amount.
The deal would be beneficial to both companies, enabling them to
expand the roll out of 4G LTE networks and improve their coverage.
Notably, the transaction would boost the T-Mobile spectrum position
in 15 out of the 25 markets, Philadelphia, Washington, Detroit and
Seattle in particular. It would make T-Mobile a strong competitor
against the larger rivals -
Sprint Nextel Corp.
The proposed deal is awaiting the Federal Communications
Commission's approval, which is expected in late summer. The sale
of airwave licenses will also depend upon the regulatory approval
of the three pending spectrum deals with Cox Communications,
Leap Wireless International Inc.
) and SpectrumCo - a group of cable companies including
Time Warner Cable
) and Bright House Networks.
These pending deals, announced last year, are facing stiff
opposition, in particular from T-Mobile,
MetroPCS Communications Inc.
) and 10 other public interest groups. They argued that the
purchase would lead to the concentration of spectrums in the hands
of Verizon, which is already the largest U.S. mobile service
provider with the maximum number of licenses.
The deal would also allow the cross selling of each other's
products and services, and raise concerns among some politicians
and consumer advocacy groups. In order to gain regulatory approval,
Verizon is aggressively looking for the sale of its 700 MHz A and B
Since the company's spectrum deals are interrelated with each
other, we will be carefully watching how it all unravels for
Verizon. As a result, we are maintaining our long-term Neutral
recommendation on Verizon. Currently, the stock retains the Zacks
#2 (Buy) Rank for the short term (1-3 months).
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