Verizon, T-Mobile Will Swap Unused Airwaves to Improve Coverage

Verizon Wireless, the largest U.S. mobile-phone carrier, agreed to exchange airwaves throughout the country with T-Mobile US Inc., a precursor to a broader potential deal between the two companies.

Verizon and T-Mobile will swap airwave licenses in 518 U.S. counties covering about 133 cities and towns, according to a filing with the Federal Communications Commission. The exchange involves spectrum types known as advanced wireless service, or AWS, and high-band personal communications service, or PCS.

The move is separate from Verizon’s effort to sell its 700-megahertz A-block spectrum. T-Mobile also is close to a deal for those airwaves, according to a person familiar with the discussions. The transaction will involve a different spectrum swap, along with a cash payment by T-Mobile, said the person, who asked not to be named because the talks are private.

Today’s deal is more about tidying up the carriers’ spectrum, so that their airwaves aren’t in scattered patches, said Walt Piecyk, an analyst with BTIG LLC in New York.

“It’s small and the type of stuff operators do to clean up their spectrum and make it more contiguous,” Piecyk said. “Contiguous is easier to work with when building networks.”

The looming A-block transaction will probably generate about about $3 billion for Verizon, Piecyk has estimated. Verizon, based in Basking Ridge, New Jersey, originally acquired those airwaves in a 2008 government auction for about $2.6 billion. T-Mobile raised about $4 billion last month to shop for spectrum, aiming to increase the capacity of the Bellevue, Washington-based company’s network.