Ding dong, sing the naysayers, AT&T's bid to buy T-Mobile is almost dead. We've been keeping an eye on the troubled $39 billion acquisitions crusade through the recent weeks. Earlier this month, AT&T declared that the company would press ahead in its bid to beat a Department of Justice lawsuit against the merger, despite a hyper-negative Federal Communications Commission report on the proposed buyout.
[partner id="arstechnica"]But the DoJ doggedly argued before the U.S. Court for the District of Columbia that, since AT&T withdrew its application to the FCC, the trial has lost its urgency and should be postponed or even put on ice. Faced with this resistance, AT&T quickly shelved its brave words, concurring with a court delay."We are actively considering whether and how to revise our current transaction to achieve the necessary regulatory approvals," the wireless giant told reporters.
Meanwhile, Verizon is stealthily hunting down spectrum via a lower profile strategy that could generate far less public grief. Consider its recent moves.
On Friday, Verizon announced that it has cut a deal with Cox Communications to buy 20 MHz of the cable company's spectrum for $315 million. The purchased licenses are located in the Advanced Wireless Services (AWS) zone, and cover about 28 million "points of presence," aka "POPs" -- access links to the Internet or local exchange carriers. In November, Cox disclosed that it was phasing out its wireless service, although it would continue to serve its subscribers through the end of March.
On top of the sale, Cox and Verizon will function as "agents," authorized to market each other's products and services -- no small detail given that Cox is the third largest cable operator in the United States. "Over time, Cox may have the option to sell Verizon Wireless' services on a wholesale basis," the press release adds. The Cox/Verizon transaction is obviously not as grand in scale as the AT&T/T-Mobile deal. And the AWS zone, way up there in the 1.7 to 2.1 GHz region, should not be confused with the coveted 700 MHz sector. The "beachfront broadband" licenses to this area of the spectrum were auctioned off in 2008 to the tune of $19.6 billion, and Cox is apparently keeping its share of that treasure.
Still, 20 MHz is nothing to sneeze at. By way of comparison, it is almost the size of the FM band or the amount of spectrum licensage that Sirius-XM owns. And the AWS band is quite valuable, having been the theater of fierce battles between upstarts and incumbents like T-Mobile. When the FCC sold a huge chunk of it back in September of 2006, 104 bidders paid the U.S. Treasury almost $14 billion for 1,087 licenses.
But this acquisition pales in scope to another brokered earlier this month. On Dec. 2, Verizon announced that it would acquire 122 AWS licenses covering 259 million POPs for the price of $3.6 billion. The seller is SpectrumCo, LLC, jointly owned by Time Warner Cable, Bright House Networks, and Comcast. Here is how the money will be paid out: Since Comcast owns 63.6 percent of SpectrumCo, it will take around $2.3 billion of the sale; Time Warner cable owns a little over 30 percent, and will receive approximately $1.1 billion; Bright House owns the rest and will get a payout of $189 million, or thereabouts.
SpectrumCo forked out quite a bit of cash in that 2006 AWS auction to get this property. According to the FCC's final tally, the company bid no less than $2,377,609,000 for licenses in that contest. Now these frequencies will go to bolstering Verizon's LTE network, the company promises. As with Cox, Verizon and the three cablers will also set up a mutual sale deal. All will function as agents to market each other's products, "and, over time, the cable companies will have the option of selling Verizon Wireless' service on a wholesale basis."
Although the Verizon/SpectrumCo transaction is only about a tenth of the monetary size of the AT&T/T-Mobile merger, the participants will still have to seek a green light from FCC and submit to a Hart-Rodino Act review of the sale. This means that the Department of Justice and Federal Trade Commission will look at the deal. The Cox transaction already has at least one prominent critic: Andrew J. Schwartzman of the Media Access Project. Cox Communications has joined its cable brethren in an arrangement "that insures [sic] that Verizon and the cable industry will stop competing with each other," Schwartzman declared in a press release:
Indeed, the Cox/Verizon deal gives credence to ancient telecom wisdom -- the lower the scale and visibility of your proposed merger or buyout, the more easily it will get past regulators.
It should be noted that AT&T has a few of these comparatively smaller affairs in the hopper as well. The telco has an application pending to buy almost a dozen 700 MHz licenses from San Diego-based Qualcomm. And it also seeks FCC permission to purchase a group of licenses from Knology of Kansas. The first transaction moves quite a bit of spectrum in AT&T's direction, the second not as much. Perhaps if the AT&T/T-Mobile adventure finally sunsets, we'll see the former company go to the same industry for spectrum, too.
Meanwhile both AT&T and the DoJ have asked for a postponement of proceedings until Jan. 18, if a resolution of the matter doesn't come sooner. Hovering over that self-imposed deadline is another that arrives about nine months later. "Somewhere I have read that there is a 9/12/12 drop-dead date," noted Judge Ellen S. Huvelle in the last discussionbetween AT&T and the DoJ on the merger in the Federal court. "Is that correct? What does that mean? What's that date?" "It's a date by which we have to achieve the closing of the merger," explained AT&T's attorney Mark Hansen, "or penalties are -- not penalties, I guess is the wrong word, but financial consequences ensue." Translation: "financial consequences" is the $4 billion breakup fee that AT&T would owe T-Mobile if the transaction is abandoned.
