Verizon (NYSE:VZ) plans to sell some of its existing 700 MHz spectrum it has little use of currently in order to get the regulatory approvals it seeks to buy AWS spectrum from the cable companies. The largest wireless carrier in the U.S. has reportedly signed on Loop Capital in addition to Stephens Inc to help it find potential bidders for the spectrum sale that can alleviate the FCC’s spectrum hoarding concerns. Verizon had announced the controversial $3.6 billion deal with SpectrumCo, a joint venture formed by Comcast (NASDAQ:CMCSA), Time Warner (NYSE:TWC) and Bright House Networks, to buy all its spectrum late last year in December. Soon after, it signed a similar deal with Cox Networks to add to the spectrum pile it is building to fight the spectrum crunch that is plaguing the wireless industry.
700 MHZ spectrum sale addresses many concerns
Sprint and T-Mobile have been opposing the deal on the grounds that the spectrum purchase will give Verizon way too much spectrum and skew the wireless dynamics completely in favor of the larger incumbents. Verizon’s move to sell some of its existing spectrum is an attempt at dispelling these concerns. T-Mobile has said that it is not interested in the 700 MHz spectrum that Verizon is offering but several other smaller carriers such as Leap and MetroPCS may want to get their hands on the resource. We know at least one carrier, U.S. Cellular, that has expressed its interest to the FCC for the spectrum that Verizon is willing to part with.
Finding enough number of buyers will help Verizon prove to the FCC that the spectrum it sells will see many benefactors in the wireless industry and help increase competition in the industry. Further, it mitigates concerns that it may be buying the spectrum simply to hoard it. Still, there is a distinct possibility that Verizon be asked to divest some of the assets it acquires if the proposed spectrum sale doesn’t completely alleviate FCC’s concerns. In one form or another, we see the FCC approving Verizon’s cable spectrum buy because it brings back spectrum from the spectrum hoarders and addresses the spectrum crunch situation of the wireless industry. (see The Verizon-Cable Deal Will Go Through Despite FCC Delays)
At a time when demand for data services soaring as subscribers increasingly use mobile devices to remain connected and watch videos on the move, bringing spectrum back to the wireless industry will not only see the resource being put to use but also help improve speeds and prevent network clogging. Additional spectrum will also allow an increasing number of wireless service providers to lay out LTE networks, which not only provide higher 4G speeds but also serve to improve network efficiency. This will see smartphone users increasingly use data intensive applications on their smartphones, driving data ARPUs up for carriers.