Verizon, T-Mobile Want  to Trade Spectrum

Deal is designed to help each expand their LTE capacity

By John Eggerton -- Broadcasting & Cable, 6/25/2012 9:44:49 AM

Verizon and T-Mobile have agreed to swap some advanced wireless spectrum, contingent on the FCC approving Verizon's deal to buy spectrum from cable operators. It will also require separate approval by the FCC.

The deal is designed to help each expand their LTE capacity, according to Verizon.

Verizon will give up more spectrum than it gets, to T-Mobile will also being putting cash in the deal. Terms were not disclosed.

The FCC is currently in day 137 of its informal 180-day shot clock on Verizon's proposed $3.9 billion purchase spectrum from SpectrumCo--Comcast, Time Warner Cable, Bright House, and former SpectrumCo partner, Cox.

"The agreement with T-Mobile is further evidence of the importance of a secondary spectrum market to give companies the flexibility to exchange or acquire spectrum to meet customers' growing demands for wireless data services," said Dan Mead, president of Verizon Wireless, in a statement. "The AWS licenses we'll acquire from T-Mobile and through SpectrumCo, Cox and Leap will be used to add capacity to our 4G LTE network."

BernsteinResearch analyst Craig Moffett predicts the Verizon/T-Mobile announcement will help secure FCC approval for the deal.

In a note to clients Monday, he pegged T-Mobile's cash payment at no more than $260 million and said the deal means T-Mobile would be getting spectrum covering about 60 million people, and Verizon about 22 million, but boosting contiguous holdings for both.

"As a result of this transaction, T-Mobile USA will gain AWS spectrum in many regions of the Northeast where it has historically had a weak portfolio, and give up small portions of spectrum in California where it has ample spectrum holdings," he said.

In addition to clearing a path for rapid approval of SpectrumCo, says Moffett, the deal, if approved, could also signal that the FCC is laying the groundwork for a 100 mHZ spectrum cap per market, creating "more plural" ownership of spectrum going forward.