VZ Wireless/T-Mobile Spectrum Deal Has a Catch

Verizon Wireless has struck a deal to transfer some Advanced Wireless Services (AWS) spectrum to T-Mobile US Inc. that comes with a pretty big catch -- the deal won't go down unless Verizon Wireless wins approval for the AWS spectrum it's in line to buy from four cable operators and Leap Wireless International Inc. (Nasdaq: LEAP). (See VZ Wireless, T-Mobile Strike Spectrum Deal.)

Under the agreement, Verizon Wireless and T-Mobile will swap spectrum involving a total of 218 markets, and does include some AWS capacity that Verizon Wireless is to obtain from Leap, Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. , Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks . T-Mobile's poised to come out of the deal with the most spectrum and, therefore, has agreed to pay Verizon an undisclosed amount of cash to offset the difference.

A Verizon Wireless spokeswoman said the proposed swap with T-Mobile will give Verizon Wireless more AWS spectrum that aligns with its existing capacity, as well as greater depth in those markets. Most of the AWS spectrum Verizon Wireless is to receive from T-Mobile involves markets on the East Coast, as well as 17 markets out west.

Verizon Wireless has already proposed to sell a portion of its 700MHz spectrum holdings if the pending AWS deals get completed. The carrier expects to win approval for those sometime this summer. T-Mobile CEO Philipp Hum said in Monday's announcement that a summer close will allow his company to use the spectrum for the Long Term Evolution (LTE) service rollouts it's teeing up for 2013.

Why this matters
Monday's announcement might make it easier for Verizon Wireless to obtain government approvals for its proposed AWS spectrum deals, as T-Mobile has been among those that were rallying against them. Presumably, T-Mobile will look on Verizon Wireless's spectrum deals with the cable companies more favorably now that the carrier is set to benefit if those agreements do indeed get done.

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— Jeff Baumgartner, Site Editor, Light Reading Cable