LITTLE ROCK — Verizon Wireless, seeking approval to buy rights to airwaves from cable companies, will sell other spectrum licenses potentially worth billions of dollars if it can complete the purchases under scrutiny by the FCC.
The largest U.S. wireless carrier plans to sell all of its 700 megahertz A and B spectrum licenses, covering dozens of major cities across the U.S. and smaller markets, according to a statement Wednesday from the Basking Ridge, N.J.-based company. The areas include New York City, Washington, Philadelphia, Chicago, Dallas, Houston, Los Angeles and Miami.
Verizon Wireless paid $4.7 billion for rights to the spectrum, according to JPMorgan Chase & Co.
Verizon Wireless said the sale is contingent on the closing of its pending $3.6 billion purchase of unused airwaves from a group including Comcast Corp., the largest U.S. cable provider, and No. 2 Time Warner Cable Inc., as well as separate deals with Cox Communications Inc. and Leap Wireless International Inc. The cable companies had originally planned to use the airwaves to enter the wireless business.
Opponents have said the accord with the cable group, which needs approval from the Federal Communications Commission, would result in less competition and higher prices.
“This is a reflection that their approval process is not going well,” said Walt Piecyk, analyst at BTIG LLC in New York. “Investors have underestimated the challenges that Verizon faces at the FCC.”
Verizon Wireless and the cable companies also agreed to market one another’s services, an arrangement that the Justice Department is looking into.
“The timing of this announcement has absolutely nothing to do” with the progress of the cable deal’s regulatory review, said Peter Thonis, a spokesman for Verizon Wireless’ parent, Verizon Communications Inc. Verizon Wireless has long had plans to sell the A and B airwaves after the cablespectrum deal was done, Thonis said.
Verizon Wireless purchased the A- and B-block spectrum licenses as part of a $9.9 billion winning bid that also included the C-block during a 2008 FCC auction.
Shares of Verizon Communications Inc., which owns the wireless unit with Vodafone Group PLC, fell 8 cents to close Wednesday at $37.66. Rival Clearwire Corp. fell as much as 20 percent as investors speculated a big swath of airwaves on the market threatens to dilute the company’sspectrum value.
Verizon Wireless and competitors AT&T Inc., T-Mobile USA and MetroPCS Communications Inc. are seeking to increase their spectrum holdings to ensure they have enough capacity as demand for services such as Web browsing and video streaming rises. AT&T attempted and failed to buy TMobile for $39 billion last year, citing spectrum as one of the main reasons for the deal.
Regulators are trying to make sure the market remains competitive and that no one carrier has spectrum holdings large enough to reduce rivalry.
“This does not resolve the anti-competitive problems” posed by Verizon Wireless’s deal with cable companies, said Debbie Goldman, telecommunications policy director for the Communications Workers of America labor union.
While Verizon Wireless is volunteering to sell spectrum assets, the FCC may have demanded it do so before approving the deal with cable carriers, Piecyk said.
Based on need and resources, AT&T, MetroPCS, Leap and T-Mobile are the most likely buyers of Verizon’s A- and Bblock spectrum, said Jonathan Chaplin of Credit Suisse Group AG.
“It would have been some time before they would have needed the A&B block,” the analyst said in a note. By selling it, Verizon Wireless diffuses “political pressure” and opposition to the cable deal from other carriers, he said.
Harold Feld, legal director of the Washington-basedpolicy group Public Knowledge, which opposes Verizon’s transaction with the cable providers, said the pledge to sell some airwave assets does little to reduce the harmful effects of the deal.
“Verizon is trying to use the mere offer of a spectrum sale to tempt the FCC and the Justice Department into approving the deal with the cable companies, and the agencies should resist the temptation,” Feld said in a statement. “At the end of the day, Verizon and the cable companies will still have created a cartel.”
Neil Grace, an FCC spokesman, declined to comment.
Business, Pages 25 on 04/19/2012