Verizon Open to Airwave Swap as T-Mobile Seeks More Capacity

Verizon Wireless said it’s open to accepting unused airwave licenses as payment for at least part of the spectrum it’s trying to sell, giving likely bidder T-Mobile US Inc. more flexibility to prepare an offer.

Verizon may consider trading the 700-megahertz, A-block spectrum to gain capacity in other areas, Verizon Communications Inc. Chief Executive Officer Lowell McAdam said yesterday in an interview at the UBS Global Media and Communications conference in New York. Swaps are a common transaction between carriers that have a surplus of spectrum in some cities and a need for more in others.

T-Mobile, the fourth-largest U.S. wireless provider, has raised more than $3 billion in financing in the past month. The carrier is interested in lower-band spectrum and considering a purchase from another company, it said in a filing this month, telegraphing its interest in the airwaves Verizon is selling. T-Mobile needs more capacity to handle rising demand for data services from smartphone and tablet users.

“T-Mobile has plenty of cash from their recent financings,” said Walt Piecyk, an analyst with BTIG LLC in New York. “That cash can be used to make future spectrum purchases.”

Bob Varettoni, a spokesman for Verizon, and Anne Marshall, a spokeswoman for T-Mobile, both declined to comment.

While the A-block airwaves may fit well with T-Mobile’s holdings, the spectrum doesn’t have the same benefits for Basking Ridge, New Jersey-based Verizon Wireless, which has built its network on other frequencies.

“Verizon doesn’t own enough geographic coverage to make the A-block worthwhile,” said Roger Entner, an analyst with Recon Analytics in Dedham, Massachusetts.

Channel 51

The A-block airwaves also have interference from television broadcasts on channel 51, which crosses into the same frequency in some areas.

AT&T Inc. CEO Randall Stephenson declined to comment on whether the company was considering Verizon’s A-block spectrum.

“It’s an interesting situation,” Stephenson said in an interview after his presentation at the UBS conference today. “They’ve got to get the channel 51 interference cleared to make it attractive.”

T-Mobile, based in Bellevue, Washington, fell 1.3 percent to $26.26 the close in New York. Verizon Wireless majority owner Verizon Communications slid 1 percent to $49.05, and Dallas-based AT&T dropped less than 1 percent to $34.40. Verizon is the largest U.S. wireless carrier, followed by AT&T and Sprint Corp.

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