Verizon Asking for Rare Spectrum Swap

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Downside
125
Market
121
Trefis
VZ
Verizon

Verizon (NYSE:VZ) is asking the FCC to engage in a very rare spectrum swap with US Cellular, according to FierceWireless. The company stated “In an unusual spectrum swap, Verizon Wireless is asking the FCC to allow it to swap some of its 700 MHz spectrum licenses with U.S. Cellular in exchange for certain 1900 MHz PCS licenses.” [1] Why is Verizon doing so?

The answer lies in its size and the state of the U.S. wireless market. Since Verizon already has country-wide coverage and is making good progress in deploying LTE, the logical thing to do is improve the quality of the network in its footprint. Verizon stated that the swap will help it expand capacity and improve its service. [2] In addition to this, a rise in data usage has put pressure on networks and Verizon, along with its competitor AT&T (NYSE:T), has lowest spectrum holdings per subscriber in the industry. [3] While AT&T is trying to solve this issue with the proposed acquisition of T-Mobile, Verizon might look to fill up some gaps with a spectrum swap that will help it in providing better service. Sprint (NYSE:S) looks at a better position in this respect.

Our price estimate for Verizon stands at $34.50 and is slightly below the current market price.

See our complete analysis for Verizon

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Notes:
  1. Verizon wants to swap spectrum with U.S. Cellular, FierceWireless, Jun 8 2011 []
  2. []
  3. Mobile broadband explosion and pressing demand for spectrum, mobilizeeverything.com []