Verizon, AT&T in Billion-Dollar Bidding War for 5G Spectrum
April 25 2017 - 3:32PM
Dow Jones News
By Thomas Gryta and Ryan Knutson
Verizon Communications Inc. has topped AT&T Inc.'s offer for
Straight Path Communications Inc., according to a person familiar
with the matter, sparking a bidding war over a tiny company that
controls a swath of wireless airwaves thought to be at the
forefront of next-generation networks.
Verizon bid $1.8 billion for Straight Path, topping AT&T's
stock bid of $1.6 billion earlier this month. AT&T, which has
until next week to respond, said Tuesday it was evaluating the
situation. Verizon declined to comment. Straight Path didn't
immediately respond to a request for comment.
The competing offers show how wireless networks are changing.
Both telecommunications companies surprised investors this month by
largely sitting out a major government airwaves auction. The
airwaves being sold were low-frequency, once considered
"beachfront" property because they travel long distances and
penetrate buildings -- perfect for wireless carriers that want to
cover large areas.
But consumers are now more likely to watch videos than talk on
their smartphones. As a result, carriers must focus on expanding
network capacity in targeted areas of high demand.
The airwaves controlled by Straight Path are in ultrahigh
frequencies that were once considered all but useless for wireless
carriers. These frequencies don't travel far or penetrate walls --
they are so sensitive, in fact, that they can be influenced by rain
and falling leaves.
But the frequencies are thought to be necessary for
fifth-generation networks. They aren't yet commercially available,
though Verizon and AT&T are racing to launch them in the coming
years. The two companies have already struck smaller deals to gain
access to other high-frequency airwaves.
These 5G networks require different types of network
architecture: Instead of placing surfboard-sized antennas atop
200-foot towers, 5G antennas will be much smaller and hung from
structures such as lampposts. Placing antennas closer to consumers,
along with other technological developments, will mitigate the
spectrum's shorter reach.
T-Mobile US Inc. Chief Executive John Legere said Monday that
his company had also bid for Straight Path but considered
AT&T's offer too expensive to match.
Straight Path was spun out of telecom provider IDT Corp. in July
2013. IDT paid $56 million in 2001 and 2002 for the airwaves
licenses, buying them from another telecom, WinStar Communications,
after it sought bankruptcy protection.
In January, the Federal Communications Commission fined Straight
Path $100 million for failing to use its spectrum. The FCC also
forced Straight Path to relinquish some of its airwaves, put itself
up for sale and remit 20% of the sale proceeds to the Treasury
Department as an additional penalty.
Reuters earlier reported that Verizon outbid AT&T for
Straight Path.
--Drew FitzGerald contributed to this article.
(END) Dow Jones Newswires
April 25, 2017 15:17 ET (19:17 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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