The reason: T-Mobile probably will now end its effort to block Verizon Wireless’ deal to pay nearly $4B for Comcast and other cable operators’ wireless spectrum — part of a broad peace agreement between the companies. Verizon Wireless said today that it will turn over to T-Mobile spectrum that reaches 60M potential customers (including areas of the northeast where T-Mobile is weak) in return for cash and spectrum that reaches 22M people (including several areas in California). While the companies didn’t say how much cash was involved, Bernstein Research figures it’s about $260M. But the arrangement “is contingent on the closing” of Verizon Wireless’ deals with cable, which are being reviewed by the Justice Department and the FCC. Last week T-Mobile told the FCC that Verizon’s pact with cable “poses grave competitive concerns” and would significantly diminish competition for wireless broadband in New York, Chicago, Philadelphia, Atlanta, Washington, D.C., and Detroit. Verizon’s new deal with T-Mobile also requires FCC approval. Verizon Wireless CEO Dan Mead says that the T-Mobile agreement “is further evidence of the importance of a secondary spectrum market to give the companies the flexibility to exchange or acquire spectrum to meet customers’ growing demands for wireless data services.”
Bernstein’s Robin Bienenstock and Craig Moffett say that the development is probably bad news for Dish Network, which has been amassing spectrum to develop a suite of wireless broadband services. It also casts a cloud on Sprint. Many investors believe that it will probably have to forge an alliance with T-Mobile in order to keep up with Verizon and AT&T. But T-Mobile now “would have significantly more headroom to go it alone” giving it “a far stronger negotiating position in any potential M&A discussions.” Dish shares are down 4.2% in mid-afternoon trading, while Sprint is -6.5%.
Consumer and labor groups also gave a chilly response to the new agreement. “The threat of job loss and higher consumer prices from the proposed Verizon Wireless-Big Cable deal remains, even if today’s announcement resolves some of the FCC’s concerns about one piece of the agreement,” says Communications Workers of America telecom policy director Debbie Goldman. Harold Feld, SVP of activist group Public Knowledge, says that the companies “cannot justify creating a web of anti-competitive agreements and tools for future anti-competitive collusion by divesting a handful of licenses.” Joel Kelsey of Free Press says that his group will reserve judgement for now about the Verizon’s agreement with T-Mobile. But he adds that “Verizon is badly overstating its need for the cable companies’ spectrum.”
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.