The past week saw quite a few developments in the telecom sector. The FCC finally approved Verizon’s (NYSE:VZ) plans to purchase AWS spectrum from cable companies, just a week after the deal had received antitrust approval from the Justice Department. With Verizon bolstering its LTE expansion plans with the spectrum purchase, we feel AT&T (NYSE:T) might consider partnering with Dish Network (NASDAQ:DISH) in the satellite-TV service provider’s wireless venture. Meanwhile, China’s largest wireless carrier, China Mobile (NYSE:CHL), reported a sharp slowdown in 3G growth in July even as its closest rival, China Unicom (NYSE:CHU), continued its strong 3G performance with about 60% more 3G net adds during the same period.
Verizon receives approval for cable deals
Verizon has finally received the green light from the FCC for its $3.9 billion purchase of nationwide wireless spectrum from a consortium of cable companies that includes Comcast(NASDAQ: CMCSA), Time Warner Cable (NYSE:TWC), Bright House Networks and Cox.  The carrier will, however, have to divest some of the AWS spectrum it acquires to T-Mobile within 45 days of closing the cable spectrum deal. The FCC has also imposed additional conditions that will ensure that Verizon doesn’t hoard spectrum and continues to offer data roaming arrangements on the acquired spectrum to other carriers at reasonable rates.
This comes on the heels of an antitrust approval it won last week from the Justice Department, which had sought to apply several conditions to the cross-marketing deals that the carrier and the cable companies signed together. The DoJ felt that the unaltered agreement would have hurt consumers by reducing competition and increasing prices. (see Verizon Likely To Receive FCC Approval For Cable Deals Soon)
Overall, Verizon’s spectrum deal is a positive for the industry, since it brings unused spectrum back to the wireless industry at a time when demand for data services is soaring and the industry is trying to avoid a spectrum crunch. Verizon’s divestiture of some of the acquired spectrum, as well as the sale of the lower blocks of 700MHz spectrum, will help reallocate spectrum among carriers in a way that meets specific carrier needs. Not only will this help carriers build out robust LTE networks but also improve speeds and prevent network clogging.
Now that Verizon has secured spectrum for its LTE plans, AT&T will be aggressively looking for ways to bolster its own spectrum resources. After recent deals with Nextwave Wireless, Comcast and Horizon Wi-Com, we believe AT&T could look to partner with Dish in its maiden wireless bid.
Last year, AT&T went after T-Mobile for its spectrum but, ironically, ended up parting with some of its own spectrum as part of a break-up fee after the proposed merger failed to pass regulatory muster. Trying to acquire T-Mobile was probably an ill-advised move considering the anti-competitive concerns it raised in an industry that already had smaller players finding it hard to compete in a near-duopolistic environment. Having learned from that fiasco, however, AT&T can look to make a bid for some of the smaller wireless players. But having had a very public run-in with regulatory bodies recently, AT&T will probably find it prudent to avoid the M&A scene in the near-term. In such a scenario, Dish’s spectrum could be a potential near-term solution for AT&T. (see Verizon’s Cable Spectrum Deal May Cause AT&T To Partner With Dish)
China Mobile’s 3G slowdown
China Mobile reported its slowest growth in 3G additions in 19 months as only about 1.9 million subscribers opted to join the company’s 3G network in July, a sharp fall from over 2.8 million in 3G net adds posted in June. This is in stark contrast to competitor China Unicom, which continued its impressive 3G showing by adding about 3.1 million 3G subscribers in July, the most any carrier has had this year. For the first half of 2012, China Unicom led the 3G charts with about 17.5 million 3G net adds compared to China Mobile’s less than 16 million for the same period. Despite an overwhelmingly large subscriber base of close to 670 million, China Mobile is falling behind in the 3G race as smaller rivals such as China Unicom are getting aggressive with their 3G plans. (see China Mobile Needs To Step Up As 3G Growth Slows)Notes:
- FCC CONCLUDES REVIEW OF VERIZON WIRELESS-SPECTRUMCO DEAL AND APPROVES RELATED SPECTRUM TRANSACTIONS, FierceWireless, August 23rd, 2012 [↩]