Leading wireless company Verizon Communications Inc. (VZ - Analyst Report) is reportedly eying a spectrum buyout from DISH Network Corp. (DISH - Analyst Report) in a bid to accelerate its Internet speed. Although no official announcements were made in this regard, news reports suggest that the two companies have long been engaged in talks over the prospective deal.
While Verizon may benefit internally from this planned spectrum purchase, it will also help the company in averting regulatory challenges associated with buying through spectrum auctions. Going forward, one of the major hurdles for behemoths like Verizon will be the restrictions proposed by Federal Communications Commission Chairman Tom Wheeler, for 2015 spectrum bids, which demonstrate limitations on bids by large carriers so as to help smaller telecom and Internet companies gain competitiveness.
Verizon Communications has a strong foothold in the wireless market and expects growth from higher penetration of devices and increasing market penetration of 4G LTE services. As a result, it is always on the lookout for more spectrums to boost its network capacity and support growth goals. In this context, on Jan 6, 2014, Verizon Wireless had announced its agreement to transfer 700 MHz A Block spectrum licenses to T-Mobile USA Inc. (TMUS - Snapshot Report) for $2.4 billion and spectrum licenses in the AWS and PCS bands. The bands will help in expanding Verizon’s 4G LTE network coverage. The transaction is expected to close by the first half of 2014.
Thereafter, in Apr 2014, the company had entered into an agreement with Cincinnati Bell Inc. (CBB - Analyst Report) for purchasing spectrum licenses worth $194 million. The deal is expected to close by the second half of this year and would incorporate licenses in key markets like Greater Cincinnati and Dayton, Ohio areas of northern Kentucky and southeastern Indiana. In these areas, Cincinnati Bell reportedly offers GSM-based 2G, 3G and HSPA+ services through 460 cell sites.
Verizon currently has a Zacks Rank #3 (Hold).