Verizon Said to Be Near Airwaves Deal With T-Mobile

Verizon Wireless is nearing an agreement to sell unused airwaves to T-Mobile US Inc. in exchange for cash and spectrum in cities where it needs more capacity, according to a person with knowledge of the process.

The sale of the 700-megahertz spectrum will be announced as soon as next week, after final details are hammered out, said the person, who asked not to be identified because the transaction isn’t yet public. T-Mobile, the fourth-biggest U.S. wireless carrier, will gain frequencies covering a population of about 150 million people.

Verizon, the nation’s largest mobile-phone carrier, will probably demand about $3 billion for the spectrum, according to Walt Piecyk, an analyst at BTIG LLC in New York. Verizon originally acquired the airwaves -- part of a group known as the A block -- in a 2008 government auction for about $2.6 billion.

The deal, which is subject to approval by the Federal Communications Commission, would give T-Mobile a big swath of low-band frequencies -- a type of spectrum that Chief Operating Officer Jim Alling has said are the missing piece of its network coverage. Verizon, meanwhile, can use T-Mobile’s so-called AWS airwaves to relieve congestion in cities such as New York.

Torod Neptune, a spokesman for Basking Ridge, New Jersey-based Verizon Wireless, declined to comment, as did Anne Marshall, a spokeswoman for Bellevue, Washington-based T-Mobile.

T-Mobile rose less than 1 percent to $25.61 at 2:42 p.m. in New York. The stock had climbed 28 percent this year through yesterday. Verizon fell less than 1 percent to $47.96.

Raising Funds

T-Mobile raised about $4 billion last month to shop for spectrum licenses, aiming to increase the capacity of its network. Surging demand for smartphones, which can surf the Web and play movies and music, have made airwaves more valuable. T-Mobile is especially interested in more low-band spectrum because those frequencies can carry signals further through buildings, giving it deeper coverage in cities.

Earlier this week, both T-Mobile and Verizon executives said they were open to a deal that involved cash and a trade of airwaves. These kinds of swaps are a common transaction between carriers, which often have a surplus of spectrum in some cities and a need for more in others.

The A-block airwaves have a drawback, though, since they have interference from television broadcasts on channel 51 in some areas. Verizon never put the spectrum to use because it built out its network with different frequencies, said Roger Entner, an analyst with Recon Analytics in Dedham, Massachusetts.

“Verizon doesn’t own enough geographic coverage to make the A block worthwhile,” he said.