T-Mobile to buy Verizon spectrum for $3.3 billion, eyes more purchases

Mon Jan 6, 2014 1:54pm EST
 
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By Sinead Carew and Neha Alawadhi

(Reuters) - T-Mobile US Inc TMUS.N 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 (DTEGn.DE: Quote), 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 (DISH.O: Quote).

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 (T.N: Quote) and Verizon Wireless in developing high-speed data services.

T-Mobile, which may itself be an acquisition target of Dish or Sprint Corp S.N, 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 years ago.

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.   Continued...

 
Signage for a T-Mobile store is pictured in downtown Los Angeles, California August 31, 2011. REUTERS/Fred Prouser