Mergers & acquisitions

MSOs Sell AWS Spectrum to Verizon for $3.6B

Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks -- MSOs involved in the SpectrumCo LLC joint venture -- have inked a deal to sell their Advanced Wireless Services (AWS) spectrum to Verizon Wireless for US$3.6 billion, and, as part of the agreement, have included an option that will let the MSOs sell Verizon Wireless services on a wholesale basis.

Under the financial end of the deal, Verizon will acquire SpectrumCo's 122 AWS spectrum licenses covering 259 million POPs, with Comcast, which owns 63.6 percent of SpectrumCo, set to receive $2.3 billion from the sale, and TW Cable (31.2 percent) to get $1.1 billion, and Bright House (5.3 percent) to net $189 million.

The MSOs will come away with a handsome profit if the deal passes muster at the Federal Communications Commission (FCC) . When SpectrumCo won the licenses in 2006, Comcast paid $1.29 billion and TWC paid $632.2 million. (See SpectrumCo Gets Licenses and Sprint to Exit SpectrumCo Venture .)

On the product and service end of the deal, MSOs and Verizon Wireless, in addition to the aforementioned wholesale component that will come into play "over time," will also become agents to sell one another's products. On top of that, the MSOs and the wireless operator will form a technology joint venture that aims to "better integrate wireline and wireless products and services."

Comcast Cable President Neil Smit noted in a statement that the agreements, together with the MSO's own Wi-Fi buildout plans, "enables us to execute a comprehensive, long-term wireless strategy…" Verizon Wireless President and CEO Dan Mead, meanwhile, said the AWS capacity purchase will bolster its Long Term Evolution (LTE) strategy and "now solidifies our network leadership into the future."

Why this matters
In addition to giving Verizon Wireless additional capacity for LTE, the deal lays to rest any worry from Wall Street that the MSOs would use their AWS capacity to build out their own wireless network. The deal also simmers speculation that the MSOs could step in and do a deal with T-Mobile US Inc. now that its pending acquisition by AT&T Inc. (NYSE: T) is in hot water. (See FCC OKs AT&T’s Merger Application Withdrawal .)

The deal with Verizon Wireless would also appear to put Sprint Corp. (NYSE: S), cable's traditional wireless partner, out of the long-term wireless plans at Comcast, TW Cable and Bright House. It also calls into question cable's near-term commitment to the struggling Clearwire LLC (Nasdaq: CLWR). (See Sprint Keeps Clearwire (& Unlimited) Alive.)

Today's deal may also shed light on plans underway at Cox Communications Inc. , a SpectrumCo partner that paid $248 million for its AWS spectrum licenses. That MSO, which recently decided to shut down its wireless service, has yet to reveal what it intends to do with its AWS and 700MHz spectrum that originally was tagged to help Cox build out its own wireless network. (See Cox: We're Not Selling Our Spectrum.)

For more
Catch up on cable's wireless twists and turns.

— Jeff Baumgartner, Site Editor, Light Reading Cable

AESerm 12/5/2012 | 4:46:58 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

Thanks, fgoldstein. That seems largely correct on RFoG, at most a corner case (albeit useful) for cable. And the DAS play does looks promising. As for RF being wireless, I was thinking less business and more fundamental: the electromagnetic spectrum itself being naturally free from any PHY layer. Or on a pedestrian or technician level, that someone who understands quadrature amplitude modulation (QAM), the cable RF flavor, is likely to understand the various kinds of frequency modulation (FM) that appear more often on the advanced wireless side. AM/FM, it kind of goes back to radio, that being the "R" in your CMRS providers, non?

paolo.franzoi 12/5/2012 | 4:46:58 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B



Depends on what you mean.  QAM, QSK, DPQSK, PAM and even DMT were used in wireline modems back in the 1960s, 1970s, and 1980s.  (See the link for a description of a dial modem company using DMT http://en.wikipedia.org/wiki/T... ).  One of my former employers (during those days called Milgo Electronics Corporation) was building 14,400 bit per second leased line multiport, multidrop modems in the 2nd half of the 1960s.  They had other competitors (Codex and Paradyne for example) that built similar products. 

Most of these modulation schemes have been around from the 1950s when lots of signaling work was done as part of research for wireless communications for the military.  Some of the advances come from surprising sources http://en.wikipedia.org/wiki/H... .

So the modulation scheme knowledge is pedestrian.  What is real is the ability to build good matching systems for attennas and good receivers based on understanding the channel characteristics.  This is why I keep saying that Shannon and Nyquist rule here.  What has happened is DSP technology has lowered the cost of building high speed modulators and demodulators.  In the old days, we built our own DSP silicon then switched to TI DSPs.  But think about all these digital comms (Qualcomm, Broadcomm, TI, Lantiq)...its all DSP technology.


fgoldstein 12/5/2012 | 4:47:11 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B


While your comment "Of course, the RF bundled in coax is itself wireless..." is not exactly correct -- it's RF on wire, after all, not wireless -- it points to another possible cable/wireless convergence.  HFC is RF on coax, and cable is looking at RFoG, which FiOS already uses for its linear channels.  Perhaps that's becoming obsolete for video, since a big fat bit pipe can carry a lot of digital video channels. But think about Distributed Antenna Systems.  That's passing a radio frequency signal over glass to a small transmitter. DAS needs lots of glass for backhaul, though.  Who has that?  As cable companies put more fiber on the poles, they'lre obvious candidates to do the DAS backhaul.  And with smartphones using more and more data, DAS may be the only way to support demand in urban areas.  So VZW either gets it from cable, or would need Core to be split into a LoopCo and ServiceCo, so that the LoopCo could provide glass.  Core today, of course, has no obligation to provide glass backhaul to CMRS providers.  MetroPCS has been pulling its own, but that's costly.

msilbey 12/5/2012 | 4:47:15 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

Clearly what we need here is for Colbert to do another history lesson like the clip he did when the Cingular brand went away. (Hard to believe that was only 4 years ago?)  http://www.youtube.com/watch?v=rsCp-1hgfxI

RE: Fios- fascinating theory that it's dead, but I don't think we're there yet. Still too much for VZ to gain now that everything is switching over to IP. 

AESerm 12/5/2012 | 4:47:16 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

Apt note on Metrophone, aka Comcast Cellular, which SBC bought in 99. And very true, the Philly boys especially know wireless: Current EVP/COO Comcast Cable Dave Watson spent 7 years with that unit, becoming president. (Of course, the RF bundled in coax is itself wireless, but that's another matter.) As for end of FiOS, that's a bit dramatic. At the moment we're seeing is somethign quieter, perhaps unintended: a de facto brand shift. Remember the "It's the Network" campaign? What that effectively masked were the several networks that stood behind the famous VZ test man (front man?). Landline, core/business, wireless. And as per fgoldstein's earlier note below, in an aside about Vodafone's profits, even wireless is a united front: No 2 global wireless giant Voda owns 45 percent of VZ. It's always been about the networks. (plural)

fgoldstein 12/5/2012 | 4:47:18 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B


These are AWS-1 frequencies, 1700/2100 MHz.  It's a 20 MHz license (10+10).  The AWS band had a lot of different license types, but SpectrumCo went for the EA licenses.

Note that AT&T never owned Comcast.  AT&T bought TCI and MediaOne.  The former had been very large but very much a fixer-upper.  MediaOne was in good shape, and Comcast "lost" a bidding war to AT&T.  The combined company became AT&T Broadband.  Then AT&T blinked and sold it to Comcast for about 3/5 of what they had put into it. This turned Comcast from a mid-sized regional MSO into the big kahuna that they are today.

People often don't realize that Comcast owned the A-side cellular carrier in Philadelphia, Metrophone, before they sold it to SBC (what's now AT&T) around 1999.  So they were not total stranger to wireless.

Good memory about Sprint, though.  Founded by Southern Pacific, it was bought by GTE, who sold it in two phases to United Tel, which later renamed itself Sprint (it was "US Sprint" for a while, when it was a joint venture between the two).  United-called-Sprint then split in the mid-2000s, the ILEC becoming Embarq, which is much missed since it was bought by Satan Himself.

steve q 12/5/2012 | 4:47:19 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

The only thing i see is that verizon corp is letting there wireless side get the best of them. And what happen to those customer that have fois service with verizon will they had a better deal with comcast then verizon,all i see is the end of fois but it is still faster internet and even with the cable company we still lead the way. I just hope Adams understand where this company came form that was the baby bell's they are the maker of the company that is today. And the 4glte is still in the box most people still use the 3g system. Anyone that is hoping for a great deal just have to ask yourself what next .

Jeff Baumgartner 12/5/2012 | 4:47:19 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

<What this really means:  FiOS is dead.>

That's an interesting opinion.  I wouldn't bury FiOS  yet, but the cable guys are going out of their way to draw lines between the FiOS end of Verizon and the wireless end... Comcast Cable President spoke at the UBS conference today, and repeated what TWC's Glenn Britt said... that they view those businesses separately and will continue to compete with FiOS in those markets. More on this soon.

Interesting too that the top line profit Comcast stands to get from the spectrum deal washes out the $1B investment in Clearwire. No harm, no foul on that deal (at least from Comcast's perspective)? JB



^Eagle^ 12/5/2012 | 4:47:20 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

All things old become new again.

Remember folks, at one time ATT owned also the biggest cable company, then spun it out.

kind of reminds me of Verizon buying MCI several years back.  Some years before that, GTE (what is now Verizon) had purchsed Sprint.... then spun it back out as an independent company.  Then later, Verizon needed to buy a nationwide fiber network, and bought MCI.

Bet ATT wishes they still had Comcast on some levels.

Of course, those cable cos' would likely not have done the alliance to buy the spectrum if ATT was still the owner of Comcast...

But interesting how these deals keep circling back around in various forms.

maybe it means I am getting old as I recall who "begat who" as telecom has evolved.


^Eagle^ 12/5/2012 | 4:47:20 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

quick question: anybody know the wavelength / frequencies of the spectrum that was auctioned?

both the band and also how wide was the spectrum?





fgoldstein 12/5/2012 | 4:47:22 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

What this really means:  FiOS is dead.

VZ under Smith (and to some extend Seidenberg) viewed Comcast as a blood enemy, to be harmed even if it killed themselves.  McAdam, however, comes from the wireless side, and views the wireline side (Core) as dying.  Core had spent big on FiOS,l but its video market share was not up to target, so they basically called a halt to new expansion, beyond existing commitments.

Comcast & friends of course do very well here, getting top dollar for the AWS licenses.  Plus they get a cozy market-sharing arrangement with VZ.  VZ does okay, because they will get 20 MHz without anything like the fight, or money, that AT&T had to put up for its unsuccessful T-M bid.  Hmmm, paying a bit less than AT&T's breakup fee along?  AT&T is a loser here.  As is Sprint, of course.

But the big question becomes what become of VZ-Core.  If McAdam is disinvesting, will he sell more of it off?  Since VZW depends so much on it for backhaul, he might change his views on Special Access.  Rather than keep its rates absurdly high, in order to weaken Sprint and T-M (and to make Voda's share of the profits look smaller than they should be...), he might want them to fall, so he can do 4G backhaul everywhere.

Ideally, then, he's sell of Core in a way that minimizes its monopoly rents.  The best way would be to split it into a LoopCo, which would sell wholesale dark facilites to all carriers at Rate of Return pricing and a ServiceCo, w hich would own the switching, retail customers, and long-haul networks.  Think NBN in Oz, or OpenReach in the UK (though that's still owned by BT's shareholders).


Jeff Baumgartner 12/5/2012 | 4:47:23 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

It's particularly useful when you're trying to convince everyone that this deal is a more natural fit than it really is, which it wouldn't seem to be when compared to a pairing with Sprint or a T-mobile before AT&T tried to swoop in since those two are less competitively aligned with the MSOs.  (now we just need to convince those MSOs that if they buy boxes from from EchoStar that they're really not paying Dish...maybe today's deal offers some hope...heck, TWC is offering Slingboxes in its wideband promo in NYC, so maybe we're half-way there)

VZ Wireless buys backhaul from some of the cable guys , so the two sides have already been working together to fit a need. This just raises the bar about 20 feet.

  But cable's tried its hand at Sprint time and time again (whether through wireless partnerships or those earlier VoIP partnerships), and those have not worked out so well, so I can't really blame them for trying something so different and controversial... VZ will have a super solid cellular network and the cable guys will build out their WiFi extensions like gangbusters, so it might make for a great technical mix.

But also interesting that you've witnessed that kind of contempt at a VZ wireless store, so that does offer some evidence that the wireless and wireline sides are not exactly buddy-buddy.

I'll likewise be interested in learning what the FCC has to say about this one... will this deal make the wireless landscape more or less competitive than it is now? Does Verizon Wireless's connection with Comcast/BH/TWC put the ATT-T-Mobile deal under a different lens? JB




AESerm 12/5/2012 | 4:47:23 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

It's useful to remember that this deal is with VZ wireless, not FiOS. Mike Robuck at CED is quoting Kimberly Maki of Bright House to that effect. And I'm not sure you could describe that telco's house as entirely peaceful. Last time I went into a VZ wireless store, I heard nothing but quiet contempt for the landline business. (Then there's VZ business, the old MCI shop, the third silo.) One more thing: You don't want to jinx the deal, but there is the FCC, which tends to pay attention to deals between very large companies.

Jeff Baumgartner 12/5/2012 | 4:47:23 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

Today's announcement has no bearing on Cox's holdings, or at least they still aren't indicating what they intend to do with what they've got.  "This decision does not impact our 700 MHz and our AWS spectrum," the company said. So stay tuned.  JB


AESerm 12/5/2012 | 4:47:24 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

Looks like I jumped the gun with this comment earlier. As for the licenses, SpectrumCo bought the 20Mhz "B" bands. (Together with the "C" bands, they translated into 176 economic area licenses.) Upshot, as Jeff indicates, was a fairly national footprint for the MSOs. Historical note: SpectrumCo's win was not preordained. According to this paper by the Stanford brainiacs who acted as advisors at the time, SpectrumCo not only won but managed to purchase these assets at a discount of about 1/3 that paid by incumbent competitors, including new best friend VZ. Somebody probably deserves a bonus.

Jeff Baumgartner 12/5/2012 | 4:47:24 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

I'm still debating in my head if this indicates there can be peace on Earth or if this is a sign of the Apocolypse or if we should all take cover as matter and anti-matter clash?

But agree that it's defintely an admission by cable that they can't do wireless on their own or that it would be folly to even attempt it after everyone witnessed how well the notion of wireless-from-scratch worked out for Cox.

But now we're talking about yet another wireless JV for cable?  Pivot was a disaster, despite all the posturing by cable that they got to learn something from the experience. Clearwire wholesale deal wasn't much better, netting a negligible # of subs for cable MSOs. 

Can this really work?  Do the MSOs have any other choice but to make this work this time? This has to be their final option, right? If this doesn't work, then they may have to just buy a wireless SP outright.  JB


Jeff Baumgartner 12/5/2012 | 4:47:24 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

I agree... it's a shocker to see this deal come together.  Forget everything... it's all different now, or as Sanford Bernstein's Craig Moffett put it: it's "a complete reordering of the competitive universe as we know it today."

I still have a hard time believing this deal came together considering how competitive cable and FiOS are, but Moffett reminds that FiOS reaches just 14% of U.S. HHs, while VZ W/ireless is a natioanal provider with 900 stores in Comcast's footprint alone. 

 And I think this has to be horrible news for Sprint and Clearwire... the MSOs are keeping their stakes, but for how long?  And there's no way they'll be investing *more* in Clearwire if they can get approval for the spectrum sale and get to move on all the other co-marketing pieces of the VZ Wireless deal.

If I'm Charlie Ergen, I'm pretty happy right now at least when it comes to spectrum holdings... they're looking more and more valuable by the day. Moffett sees T-mobile perhaps stepping up to buy that if its pending M&A with AT&T crumbles.  Or he thinks that coudl make ATT a candidate as well. 

As the wireless and broadband worlds turn... JB



craigleddy 12/5/2012 | 4:47:24 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

Utterly amazing...and a real head-scratcher too. Does the cross-marketing plan mean that cable and the telcos have come to accept their weaknesses (for cable: mobile is too hard and expensive; for telcos: television is too hard and expensive)? Will the lions lay down with the lambs and there will be peace in the valley?

Well, I guess the proof will be in how aggressively they market each other's services. Can't wait to see a campaign with both Comcast and Verizon's names on it! 

Keep your enemies close and your frenemies closer.        

msilbey 12/5/2012 | 4:47:25 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

What next? Cats and dogs sleeping together? It's truly mind-boggling to consider that Comcast and Verizon will sell each other's products. But it's also interesting to think about what this means for VZ's video business. Although the front end TV business is a huge deal for the operator, VZ's also made a play to be a media services and distribution partner for cablecos looking to push IP video services. I wonder if this new alliance will also open up new deals on that front. Ultimately all of these guys have to play together to some extent because of the scale of the services they want to deliver. Nobody owns enough infrastructure globally or has enough expertise and human resources across all platforms to do everything alone. 

Still and all, I'm amazed that the political will existed to make this deal happen. Times they are a'changing. 

Jeff Baumgartner 12/5/2012 | 4:47:25 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B


I believe SpectrumCo’s wireless licenses, which don't include the licenses Cox owns, cover over 80 percent of the U.S. population. JB

alandal 12/5/2012 | 4:47:26 PM
re: MSOs Sell AWS Spectrum to Verizon for $3.6B

Where are these SpectrumCo's 122 AWS spectrum licenses for?  Thought VzW purchased a large number of AWS licenses during the auction, but most of their purchased are towards east/northeast parts.

Anyone is aware of their pre-LTE AWS deployments? Never heard them offering services in AWS before.

Looks like LTE Band4 (AWS) is right after their Band 13 (700Mhz Digital dividence).

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