AT&T Buys Spectrum From Archrival Verizon In $1.9 Billion Deal

By Alexandra Burlacu email: a.burlacu@mobilenapps.com | Jan 26, 2013 06:32 PM EST

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AT&T, the second-biggest wireless carrier in the U.S., has agreed to buy airwaves from larger carrier and archrival Verizon for $1.9 billion.

The deal is part of AT&T's strategy to bolster its network in a region that covers 42 million people. Verizon and AT&T have also been involved in a year-long spectrum reshuffling process. Basically, AT&T wants more spectrum, while Verizon has been working on making its holdings easier to use with wireless service.

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The spectrum, i.e. the radio frequencies that allow mobile devices to operate, spans over 18 states, including California, New York, Texas, and Florida, and is located in the 700MHz range. With the new deal, AT&T will be able to expand its capacity for wireless broadband in several areas including Chicago, Los Angeles, Miami, Cincinnati, and Oklahoma City. Meanwhile, the company is also getting other frequencies in Los Angeles, Fresno, California, Phoenix, and Portland, Oregon. The deal is expected to finalize in the second half of 2013.

Verizon agreed to sell AT&T 39 lower 700MHz B block licenses for $1.9 billion, allowing AT&T to expand its capacity for wireless broadband in several areas including Chicago, Los Angeles, Miami, Cincinnati, and Oklahoma City. In return, AT&T will give Verizon 10MHz of AWS spectrum in Western markets such as Los Angeles, Phoenix, Fresno, and Portland, Oregon.

Moreover, Verizon also sold 700MHz B block licenses to Grain Management, a private equity firm based in Florida, for $189 million. In exchange, Grain will grant Verizon access to the AWS spectrum it is buying from AT&T in Dallas, Texas.

In 2012, Verizon gunned for a $3.6 billion purchase of spectrum from U.S. cable companies, and pledged to sell its 700MHz spectrum if regulators approved that purchase. The deal was finalized in Aug. 2012 and Verizon has started making good on its promise to sell 700MHz licenses.

In an auction, which the Federal Communications Commission (FCC) ran in 2008, Verizon bought 109 licenses in the 700MHz band for $9.4 billion. Following the purchase, Verizon ended up with spectrum in the A, B, and C blocks. Last year, the company said it has used spectrum in the upper C block for its 4G LTE network, adding that it would continue that rollout with the cable-owned spectrum. Consequently, Verizon is now selling the 700MHz spectrum in the A and B blocks to whoever bids the highest.

The new deal with AT&T completes the sale of Verizon's lower 700MHz holdings. For the complete list of the markets covered by the 39 licenses AT&T purchased, check out Verizon's blog

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