T-Mobile Pays $.4 Billion for Verizon Spectrum

BONN, GERMANY and NEW YORK T-Mobile has agreed to pay Verizon $2.4 billion for 700 MHz spectrum that carrier won in the 2008 auction of what had been airwaves occupied by TV channels. T-Mobile announced that it would buy15 A Block licenses for $2.365 billion in cash plus the transfer of eight more wireless licenses valued at $950 million. The deal gives T-Mobile low-band spectrum (sub 1 GHz) in nine of the top 10 U.S. markets and 21 of the top 30.

Combined with its existing Boston A-Block holdings, T-Mobile said it would have low-band spectrum covering approximately 158 million people in New York, Los Angeles, Dallas, Houston, Philadelphia, Atlanta, Washington D.C., and Detroit. T-Mobile said it anticipates rolling out service and compatible handsets on this A-Block spectrum as early as the fourth quarter of 2014.

On the LTE front, the company said that in 2013, it deployed 10+10 MHz 4G LTE in 43 of the top 50 metro areas, and is commencing substantive deployments of 20+20 MHz 4G LTE in 2014. The company launched its nationwide 4G LTE network in 2013, which currently covers approximately 209 million people in 273 metro areas.

As part of the transaction, the two companies will realign spectrum blocks in certain markets, primarily in northern California and the Atlanta area. The agreements are subject to approval by the Federal Communications Commission and the Department of Justice, and other customary closing conditions. Following regulatory approval, these transactions are expected to close in mid-2014.

Marci Ryvicker of Wells Fargo said the deal values Verizon's A Block spectrum at $1.85 per MHzPop, and T-Mobile's at $1.72. (MHzPop = Sale price MHz x Population covered.) Ryvicker notes a rising price for Advanced Wireless Spectrum.

Recall that T-Mobile purchased AWS spectrum from US Cellular for $0.95/MHzPop in June 2013. Today's $1.72/MHzPop average represents an 81 percent increase. From the 700 MHz perspective, the $1.85/MHzPop price represents a 16 percent increase from the $1.59 paid by Verizon in the FCC's [2008] spectrum auction.

The deal is good news for Dish, which is sitting on 40 MHz of nationwide wireless spectrum. Ryvicker said at $1.72 MHzPop, Dish's spectrum is worth $21.4 billion.

Today's spectrum sale illustrates the continued increase in spectrum values, she said in an analyst note. In particular, the $1.74 MHz/Pop for AWS/PCS reinforces our belief that there is significant present and future value in Dish's AWS-4 spectrum holdings.

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