The once looming spectrum crisis has now arrived. With
data traffic reportedly doubling on an annual basis, the demand for
spectrum is expected to exceed supply in some U.S. markets starting
this year. The spectrum crisis is hitting Verizon and AT&T the
hardest; the two companies collectively service about 200 million
of the nation's 321 million wireless subscribers (63%). But, they
also have the most money and therefore the ability to buy their way
out of the problem given a friendly regulatory environment. So it's
no surprise that with plenty of cash in hand, AT&T and Verizon
have been on a spectrum shopping spree as of late, making huge
purchases in the secondary market.
Let's start with AT&T. Regulatory approval of
AT&T's bid to merge with T-Mobile in 2011 would have been a $39
billion, long-term solution to the company's spectrum capacity
problems. But when the bid was rejected, the company had to revert
to acquiring lesser amounts of spectrum in the secondary market
from smaller players. And so, AT&T amassed at least $2.6
billion in spectrum deals in 2012. The most publicized transaction
being its purchase of Nextwave wireless, a major holder of 2.3 GHz
WCS spectrum, for $600 million. But AT&T also quietly acquired
numerous licenses (mostly 700 MHz) held by small carriers and
individual licensees such as Cavalier Wireless, David L. Miller,
Comsouth Cellular, Ponderosa Telephone Co., Farmers Telephone Co.,
McBride Spectrum Partners and CenturyTel Broadband Wireless.
AT&T's CEO, Randall Stephenson, recently confirmed that the
company signed over 50 spectrum deals in 2012 and intends to do
more in 2013.
He wasn't kidding. On January 22, AT&T announced it will
purchase what is left of Alltel for $780 million. Then, on
January 25, AT&T agreed to purchase 700 MHz B Block licenses
from Verizon Wireless covering 42 million people in 18 states. Upon
FCC and DOJ approval, AT&T will surrender five AWS licenses to
Verizon in addition to a payment of $1.9 billion in cash ($3.77/
MHz Pop).
Verizon has a very clever spectrum acquisitions team. While
AT&T was distracted by its attempt to acquire T-Mobile in 2011,
Verizon swooped in and sealed the deal of the year. In August of
2012, the FCC's Commissioners unanimously approved Verizon's
purchase of 20 MHz of nationwide AWS spectrum licenses from Comcast
and three other cable companies - Spectrum Co. - for $3.9 billion.
These licenses were originally purchased by multiple cable
companies at FCC Auction in 2006 for $2.4 billion and should secure
Verizon's position as industry leader for another year at
least.
For Smartcomm, the high level of activity in the secondary
market is extremely positive. High prices are being paid for
quality licenses and we don't expect this trend to slow anytime
soon. Stay tuned, 2013 should be an exciting year.