T-Mobile Buys Spectrum from Verizon for $3.3 Billion

by Istvan Fekete on January 7, 2014

T-Mobile is spending $3.3 billion on wireless spectrum from Verizon Wireless and says it hopes to follow up with more spectrum purchases, Reuters reports. Verizon Wireless will receive $2.365 billion in cash and $950 million worth of spectrum, according to the deal terms made public yesterday.

Demand for wireless spectrum has been on the rise since the smartphone market penetration in the country rose to 63.8% (there are 152.5 million smartphone users in the US), according to comScore’s November 2013 data. As a result, carriers have been scrambling to boost their networks to support the increasing consumer Web surfing and video use on cellphones.

T-Mobile, the fourth national wireless player, has been busy luring customers away from other carriers by promoting its “uncarrier” policy, which could serve as an example for Canadian wireless players, but it needs more airwaves as it has fallen behind its rivals in developing high-speed data services.

The spectrum purchase came just in time for T-Mobile. Some analysts noted, though, that the price was steep at a 26% premium over what Verizon had paid for it in an auction several years ago. However, this is just the beginning of the bill T-Mobile needs to pay before using the spectrum. According to Wells Fargo analysts, the carrier needs to spend an additional $1 billion on top of the $3.3 billion just to put the spectrum to use.

“T-Mobile will now have greater spectrum with which to compete against all carriers, but we anticipate that AT&T will continue to suffer the largest impact,” Bowen said.

Plans for a wireless airwave license purchase were whispered about earlier last year, when T-Mobile raised $3.8 billion in stock and bond sales.

T-Mobile is ready to offer services as early as the fourth quarter of 2014 using the new spectrum licenses, which cover more than 150 million people in nine of the top ten US markets, and 21 of the top 30 markets, including New York, Atlanta, and Los Angeles.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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