T-Mobile to buy Verizon spectrum for $3.3 billion, eyes more purchases

Tue Jan 7, 2014 12:28am IST

Signage for a T-Mobile store is pictured in downtown Los Angeles, California August 31, 2011. REUTERS/Fred Prouser/Files

Signage for a T-Mobile store is pictured in downtown Los Angeles, California August 31, 2011.

Credit: Reuters/Fred Prouser/Files

Related Topics



(Reuters) - T-Mobile US Inc(TMUS.N) is buying wireless airwave licenses from Verizon Wireless to improve its high-speed network in a $3.3 billion deal and said it hopes to follow up with more spectrum purchases.

Shares in T-Mobile, majority owned by Deutsche Telekom (DTEGn.DE), rose 2.5 percent on Monday after the company said it will pay Verizon Wireless $2.365 billion cash and give it $950 million worth of spectrum.

Demand for wireless airwaves has risen sharply as U.S. operators scramble to boost their networks to support increasing consumer Web surfing and video use on cellphones. While the government is planning airwave auctions, spectrum demand may also drive further consolidation involving airwave owners such as Satellite TV provider Dish Network (DISH.O).

T-Mobile, the No. 4 U.S. mobile provider, has been using discounts to compete with bigger rivals, but it badly needs more airwaves after falling behind bigger rivals AT&T Inc (T.N) and Verizon Wireless in developing high-speed data services.

T-Mobile, which may itself be an acquisition target of Dish or Sprint Corp (S.N), also said on Monday that it hopes to buy additional spectrum in government auctions at the end of 2014 and in 2015.

"It's still a priority to get additional spectrum," Chief Technology Officer Neville Ray told analysts on a conference call to discuss the deal.

While they said the spectrum was crucial for T-Mobile US, some analysts noted that the price was steep at a 26 percent premium over what Verizon had paid for it at an auction several years ago.

Wells Fargo analyst Jennifer Fritzsche said the deal was "very much not a fire sale" for Verizon. She noted that it would be an important boost to T-Mobile's network, but said the buyer may have to pay another $1 billion to put the spectrum to use.

T-Mobile raised $3.8 billion in stock and bond sales in November to fund spectrum purchases. Chief Financial Officer Braxton Carter said he would look to debt markets rather than equity markets for any future spectrum funding needs.

The company will be able to use the additional airwaves to help it steal customers from rivals such as AT&T, Pacific Crest analyst Michael Bowen said.

"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.

In a sign of rising competitive tensions between the two companies, which use the same network technology, AT&T on Friday offered T-Mobile customers a $200 credit to switch to its service.

T-Mobile said it could offer services as soon as the fourth quarter using the new spectrum licenses, which cover more than 150 million people in nine of the top 10 U.S. markets and 21 of the top 30 markets including New York, Atlanta and Los Angeles.

It said the purchase, which requires regulatory approval, is expected to close around mid-2014.

T-Mobile also said the companies will realign spectrum blocks in markets such as northern California and Atlanta.

Verizon Wireless had said late last year it would again consider selling unused A Block airwaves in the 700 megahertz frequency band that T-Mobile has now agreed to buy.

TAP Advisors was the financial adviser for T-Mobile.

T-Mobile rose 89 cents to $33.17 on the New York Stock Exchange after the news. Verizon shares edged up 3 cents to $48.45. Sprint fell 27 cents, or almost 3 percent, to $9.67, while AT&T was up 12 cents at $34.92.

Reuters reported November 19 that T-Mobile was seeking to buy spectrum from Verizon Wireless, owned by Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L). (Reporting by Neha Alawadhi in Bangalore and Sinead Carew in New York; Editing by Savio D'Souza, Jeffrey Benkoe and Richard Chang)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared


A shattered large glass panel, part of Apple's cube store on Fifth Avenue, damaged from the results of the snowstorm on Tuesday is seen in New York, January 22, 2014. REUTERS/Shannon Stapleton/Files

Apple e-book settlement gets court nod

Apple Inc won preliminary court approval for its $450 million settlement of claims it harmed consumers by conspiring with publishers to raise e-book prices. In approving the accord, U.S. District Judge overcame concerns she had expressed over a settlement provision allowing Apple to pay just $70 million if related litigation were to drag out.  Full Article 

Reuters Showcase

Patent Battles

Patent Battles

Microsoft sues Samsung in U.S. over patent royalties.  Full Article 

Facebook Back Up

Facebook Back Up

Facebook restores service after outage in many countries.  Full Article 

LinkdIn Growth

LinkdIn Growth

LinkedIn's hiring business seen key to growth  Full Article 

HP Settlement

HP Settlement

Hewlett-Packard to pay $32.5 million to settle USPS pricing case  Full Article 

Digital Teleporting

Digital Teleporting

Film world's cast of toys teleport into digital playground   Full Article 

China Hacking?

China Hacking?

Hacking attack in Canada bears signs of Chinese army unit - expert  Full Article 



Start-up behind 'dunkable' phone technology explores Asian IPO  Full Article 

BBM for Windows

BBM for Windows

BlackBerry opens up BBM to Windows phone users  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage