Look Out, AT&T: T-Mobile Makes Big Spectrum Purchase from Verizon

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T-Mobile US (NYSE:TMUS) and Verizon (NYSE:VZ) have completed a deal to swap spectrum that will give T-Mobile access to Verizon’s unused low-band wireless spectrum. The additional spectrum will give T-Mobile’s network access to nine out of the top 10 U.S. wireless markets, according to a press release from T-Mobile seen by the Associated Press.

T-Mobile paid $2.37 billion in cash and transferred spectrum licenses worth $950 million to Verizon in exchange for the low-band spectrum. That type of spectrum provides better service inside buildings and in rural areas and can travel longer distances than high-band spectrum, making it useful for providing cell service in less densely populated areas.

T-Mobile is the fourth-largest wireless carrier in the United States, behind Verizon, AT&T (NYSE:T), and Sprint (NYSE:S). The company has been looking to make investments to grow its network and become a better competitor to its larger rivals. T-Mobile already has a unique approach to its business, referring to itself as the “un-carrier” and creating new options for its customers that the other carriers have imitated.

T-Mobile’s biggest rival is AT&T. Since AT&T made a botched attempt to purchase T-Mobile in 2011, the two companies have been competing for customers and making jabs at each other in the press. T-Mobile’s purchase of more spectrum in addition to its solid financial results in the past year should leave AT&T worried.

Just last week, AT&T announced a promotion that would give former T-Mobile customers up to $450 in credits for switching to AT&T. AT&T said the deal is designed to help T-Mobile customers “upgrade their mobile lifestyle.”

T-Mobile CEO John Legere responded by saying: “This is a desperate move by AT&T on the heels of what must have been a terrible Q4 and holiday for them. I’m flattered that we have made them so uncomfortable! We used AT&T’s cash to build a far superior network and added Un-carrier moves to take tons of their customers —  and now they want to bribe them back! Consumers won’t be fooled … nothing has changed; customers will still feel the same old pain that AT&T is famous for. Just wait until CES to hear what pain points we are eliminating next. The competition is going to be toast!”

According to sources cited by the unofficial T-Mobile blog TmoNews, the announcement T-Mobile will make at the Consumer Electronics Show on Wednesday could be a way to get families out of contracts with other carriers early.

The deals between Verizon and T-Mobile still need approval from regulators and aren’t expected to close until midway through the year.

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