In order to complete a controversial $3.6 billion deal between a group of cable companies — including Comcast (NASDAQ:CMCSA) — Verizon Wireless (NYSE:VZ) will have to sell valuable high-speed spectrum in 12 markets. The Verizon deal also includes a partnership agreement in addition to the spectrum purchase.
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If the sale is agreed to by Verizon, the transaction could allow T-Mobile USA a chance to acquire this spectrum, which would help the lagging operator become a more viable competitor to AT&T (NYSE:T) and Sprint (NYSE:S). Regulators in Washington have been reviewing the December Verizon-Comcast agreement. Even though regulators will not be making any final recommendations for more than a month, they have made their initial intentions clear. But sources close to the process have warned that such early leanings could change.
Under the proposed deal, Verizon would purchase unused national AWS-1 spectrum from cable providers, including Time Warner Cable (NYSE:TWC) and Bright House Networks. Principally, AWS-1 spectrum is used for smartphones. As of today, Verizon is a dominant owner of AWS spectrum in the Washington to New York City corridor. It is highly probably that Verizon will shed its AWS spectrum in those regions.
Verizon provides 4G cellular service through its 700 MHZ national footprint, with its spectrum compatible with AWS. On the other hand, T-Mobile has invested very little in AWS. It is also very difficult to attain AWS, outside of this sale, to give T-Mobile a national AWS footprint. T-Mobile has made no secret of its aggressive search for AWS spectrum.
Government regulators earlier prevented AT&T from buying T-Mobile, citing that the country needed a strong third cellular provider as a reason to deny the transaction. The Verizon deal between Comcast and other cable providers has also proved unpopular throughout the nation. Nine New York state mayors — including those in Albany and Syracuse — wrote to regulators last week objecting to the deal.