By Sinead Carew and Neha Alawadhi
Jan 6 T-Mobile US Inc 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
, 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.
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 and
Verizon Wireless in developing high-speed data services.
T-Mobile, which may itself be an acquisition target of Dish
or Sprint Corp, 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
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
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 Nov. 19 that T-Mobile was seeking to buy
spectrum from Verizon Wireless, owned by Verizon Communications
Inc and Vodafone Group Plc.