In a move to improve its high-speed network, T-Mobile US, Inc. has announced that it is buying 700 MHz A-block spectrum licenses from Verizon Wireless in a $ 3.3 billion deal, and with more spectrum purchases in the pipeline.
The deal involves about $2.4 billion in cash and AWS and PCS licenses, which have a combined value of about $950 million.
Spectrum licenses regulate radio frequencies that allow wireless communication, and the low-band spectrum covered in the deal covers about 150 million people while at the same time helping T-Mobile increase network coverage in cities across the United States.
T-Mobile, the No. 4 U.S. mobile provider, raised about $4 billion last year to shop for spectrum licenses in its bid to increase the capacity of its network. It has been using discounts to compete with bigger rivals, but still fell behind rivals AT&T and Verizon Wireless in developing and providing high-speed data services. The continued rise in popularity and sales of smartphones that can surf the Web, play movies and music, has, in turn, demanded improved network performance that can keep up with such a surge in demand and usage.
T-Mobile was especially interested in more low-band spectrum because those frequencies can carry signals further through buildings, giving it deeper coverage in cities. The airwave transactions will help give T-Mobile low-band spectrum in nine of the top 10 markets across the U.S.
T-Mobile CEO and President John Legere says the acquisition is a "great opportunity to secure low-band spectrum in many of the top markets in America."
"These transactions represent our biggest move yet in a series of initiatives that are rapidly expanding our already lightning fast network and improving its performance across the country," he said.
Analysts have weighed in on this move, noting that the price was a little high at a 26 percent premium over what Verizon paid for it at an auction several years ago. They did acknowledge, however, that the spectrum was crucial for T-Mobile. Wells Fargo analyst Jennifer Fritzsche said the deal was "very much not a fire sale" for Verizon, and the move ultimately does not end at the sale. T-Mobile might have to spend another $ 1 billion to put the spectrum to use.
Nevertheless, the move could unsettle T-Mobile's rivals a bit, including AT&T, which recently offered T-Mobile customers up to $450 credit to switch to its service.
Also, Markus Friebel, an analyst at Independent Research GmbH in Frankfurt, said that this deal may make T-Mobile a more attractive takeover target.