Leading wireless carrier, Verizon Communications Inc. (VZ - Analyst Report) is reportedly acquiring spectrum assets worth $210 million from Cincinnati Bell Inc. (CBB - Analyst Report). Verizon will first purchase Cincinnati Bell’s spectrum licenses which account for $194 million of the total purchase price.
As reported, the deal is expected to close by the second half of this year. We believe the new spectrum acquisition will boost Verizon’s wireless infrastructure and aid in its future network development.
For Verizon, the new spectrum will bring licenses for key markets like Greater Cincinnati and Dayton, Ohio areas of northern Kentucky and southeastern Indiana. In these areas, Cincinnati Bell reportedly offered GSM-based 2G, 3G and HSPA+ services via 460 cell sites.
The deal is expected to be followed by winding up of Cincinnati Bell's wireless operations, which remains highly challenged by competition from large national carriers.
As of Dec 2013, Cincinnati Bell covered around 340,000 wireless customers, which is less than 398,000 in 2012. Cut-throat competition in the wireless arena and increasing penetration of large carriers is resulting in its customer losses and business deterioration. As a result, Cincinnati Bell expects to wind up its wireless operations within 8–12 months following the spectrum deal closure with Verizon.
Cincinnati Bell is reportedly planning to lease back certain spectrum licenses from Verizon to carry on mobile operations before closing business. It will, however, continue focus on growing its bundled services in TV and broadband segment and expand its Foptics brand.
Both Verizon and Cincinnati Bell currently carry a Zacks Rank #3 (Hold).
Better-ranked stocks in the telecom sector include SK Telecom Co. Ltd. (SKM - Analyst Report) and Shenandoah Telecommunications Co. (SHEN - Snapshot Report). Both SK Telecom and Shenandoah carry a Zacks Rank #1 (Strong Buy).