Verizon offers 700MHz spectrum for cableco deal approval
Subject to its purchases of AWS licences from cable partners being agreed, it would put up its 700MHz A and B block holdings for sale
Published: 19 April, 2012
Verizon Wireless has offered to sell off some of its 700MHz spectrum, considered by many US carriers to be optimal for first wave LTE roll-out, if its planned purchase of AWS licences from four cablecos is approved.
The $3.6bn deal to acquire spectrum held by SpectrumCo (Comcast, Time Warner Cable and BrightHouse) is currently under review by regulators, and being opposed by other operators such as T-Mobile. In return for a green light, Verizon is putting its regional 700MHz A and B Block licences, most of them 10MHz or 20MHz portions covering major cities as well as rural markets, on the table.
The operator's own LTE network is being rolled out in the nationwide C Block spectrum it bought at the 2008 auction. This was the crown jewel of its new spectrum portfolio, and the loss of the more localized A and B blocks would be more than offset by the addition of 122 AWS licences to its LTE platform. The AWS spectrum will supplement the low capacity 700MHz band in metro areas, and Verizon will end up with a "rational" strategy based around just two major national blocks, reducing device costs by avoiding the rest of the fragmented 700MHz spectrum.
Verizon also has separate agreements to buy spectrum from a fourth cableco, Cox Communications, and from Leap Wireless. Its sales in 700MHz would be contingent on the success of these deals, which are at varying stages of the approval process but could close in mid-summer.
"Since wireless operators, large and small, have expressed concern about the availability of high quality spectrum, we believe our 700 MHz licenses will be attractive to a wide range of buyers," said Molly Feldman, VP of business development for Verizon Wireless. "Moreover, provided our acquisition of AWS spectrum is approved, our open sale process will ensure these A and B spectrum licences are quickly and fairly made available for the benefit of other carriers and their customers."
AT&T would be the obvious candidate to snap up the 700MHz assets. It also owns substantial holdings in the A and B blocks, and is rolling out its first LTE services in that band, but lacks sufficient capacity in some urban centers. It famously missed out on acquiring its own AWS and PCS capacity via the failed takeover of T-Mobile USA and has been casting around for additional sources of spectrum since then.
Clearwire - whose often underrated 2.5GHz spectrum has gained new prominence in the spectrum scramble ensuing from the failure of the AT&T/TMo merger - saw its shares tumble to their lowest rate since January on Verizon's news. Clearwire needs its own spectrum to retain a high value, since it could be forced by creditors to sell some of its frequencies, according to some analysts, as it funds an ambitious transition from WiMAX to LTE, despite being unprofitable. Any sale of good quality spectrum makes Clearwire's holdings less valuable, Stifel Nicolaus analyst Christopher King said in an interview.