Verizon (NYSE:VZ) announced a $1.9 billion offer from AT&T (NYSE:T) to buy spectrum licenses for 18 states. According to a press release from Verizon, the company will sell 39 lower 700 MHz B Block licenses for cash and transfer from AT&T to Verizon of AWS (10 MHz) licenses in certain western markets, including Los Angeles, Phoenix, Fresno and Portland, Oregon. As part of the deal, Verizon will sell 700Mhz B Block licenses covering Charlotte, Greensboro and Raleigh-Durham markets to Grain Management for $189 million and will subsequently lease AWS license covering Dallas, Texas from Grain, which is acquiring it from AT&T.
AT&T In Acquisition Mode For Spectrum
The announcement of this deal comes right after AT&T announced a $780 million all-cash acquisition of Atlantic Tele-Network’s rural retail business that operates under the brand name Alltel. Alltel has a rural presence spanning six states: Georgia, Idaho, Illinois, North Carolina, Ohio and South Carolina. As part of the deal, AT&T will acquire the 585,000 existing subscribers along with wireless, network access and retail stores.
AT&T has been on an aggressive push to catch up with Verizon in the wireless business. AT&T had net additions of 780,000 for postpaid customers in 4Q12. When compared to the 2.1 million that Verizon added in the same period (see Verizon’s Smartphone Growth Lifts Results Despite Weak Wireline), it is clear that AT&T is losing out to Verizon in new customer additions. In 2012, AT&T added 1.4 million postpaid subscribers while Verizon added a staggering 5 million new subscribers. At the end of 2012, Verizon had 92.5 million subscribers compared to 70.5 million for AT&T.
We expect further spectrum acquisitions from AT&T as it looks to improve its 4G-LTE network to compete with Verizon. This will have impact on CapEx, and we feel it will continue to remain high as AT&T battles it out with Verizon for the industry leader position.
What’s In It for Verizon
With this sale, Verizon will be complying with its FCC deal in 2012 to sell extra spectrum that it had following acquisitions from cable companies.  While the carriers are hopeful the deal will be approved by FCC, some consumer groups have been vocal against what they perceive as a growing duopoly.  We will have to wait to see how the FCC responds to this purchase, but for now it looks like AT&T is set to continue its aggressive push to grow its 4G-LTE coverage.Notes: