Verizon's bid challenges AT&T's offer for Straight Path: source

(Reuters) - Verizon Communications Inc VZ.N has made an offer for Straight Path Communications Inc STRP.A, topping an earlier bid from AT&T Inc T.N, in a move that starts a bidding war for a company holding spectrum used in 5G technology, according to a source familiar with the matter.

The Verizon logo is seen on the side of a truck in New York City, U.S., October 13, 2016. REUTERS/Brendan McDermid

Straight Path said on Tuesday it received a $104.64 per-share all-stock buyout offer from a “multi-national telecommunications company”. AT&T and Straight Path had agreed on a deal at $95.63 per share earlier this month.

The source did not want to be named because the matter is confidential. Verizon and Straight Path declined to comment.

A Verizon bid for Straight Path would be the latest salvo in the battle between Verizon and AT&T to gain an edge in the race to develop a fifth-generation network (5G) that would offer faster downloads and boost internet-reliant products such as self-driving cars.

“Clearly ultra-high band spectrum is a critical part of both AT&T and Verizon’s 5G Plans” Wells Fargo analyst Jennifer Fritzsche said in a research note. “We believe it fair to assume (Verizon) would like to add to this part of its spectrum portfolio with the Straight Path assets.”

Straight Path, which holds a large trove of 28 GHz and 39 GHz millimeter wave spectrum used in mobile communications, would give a new owner an advantage in 5G development.

Straight Path said on Tuesday that the higher offer was considered a “superior proposal” and it has notified AT&T that the telecom company has five days to match or exceed the new bid.

“We will evaluate the situation and make a decision in that time frame,” AT&T spokesman Fletcher Cook said in an email.

Straight Path’s shares were up 12.5 percent at $124.79, much above the offer price, indicating that investors are expecting an even higher bid to come in.

The new bidder has agreed to cover the termination fee of $38 million that Straight Path would be required to pay AT&T if it goes with another buyer, Straight Path added.

AT&T had agreed to buy Straight Path, which holds licenses to wireless spectrum, for $1.25 billion in an all-stock deal on April 10.

Reuters had earlier reported that Verizon Communications Inc VZ.N was considering outbidding AT&T.

Reporting by Liana B. Baker in San Francisco; Additional reporting by Anjali Athavaley in New York and Supantha Mukherjee and Anya George Tharakan in Bengaluru; Editing by Shounak Dasgupta and Paul Simao