Verizon Readies for Spectrum Sale

Verizon Wireless, a joint venture of Verizon Communications Inc. (VZ - Analyst Report) and Vodafone Group Plc (VOD - Analyst Report), has hired Loop Capital as another advisor for the proposed 700 MHz wireless spectrum sale. The company is aggressively looking for the sale of its 700 MHz A and B spectrum licenses, announced a month ago.

Loop Capital, along with Stephens Inc., will reach to a wide range of potential bidders.It seems that AT&T Inc. (T - Analyst Report), the second largest wireless provider, and MetroPCS Communications Inc. (PCS) will be the likely bidders. T-Mobile, a unit of Deutsche Telekom (DTEGY) is not interested in the airwaves offered by Verizon.

The move will aid Verizon to gain regulatory approval for its proposed $3.9 billion purchase of wireless spectrums from several cable companies including Comcast (CMCSA - Analyst Report), Time Warner Cable (TWC - Analyst Report), Bright House Networks and Cox Communications. The pending purchase, announced in December last year, is facing stiff opposition, in particular from T-Mobile, MetroPCS (PCS), Sprint Nextel Corp. (S - Analyst Report) and 10 other public interest groups.

They argued that the purchase would lead to the concentration of spectrums in the hands of Verizon, which is already the largest U.S. mobile service provider with the maximum number of licenses. The deal would also allow the cross selling of each other’s products and services, and raise concerns among some politicians and consumer advocacy groups.

Verizon believes that the unused spectrums of the cable companies are more beneficial than the 700 MHz airwaves. The purchase of new spectrum will double Verizon’s capacity and provide services at a much higher speed, thereby driving data revenues and boosting its competitive position.

However, the sale of the 700 MHz airwaves depends on the successful completion of pending spectrum purchases from cable companies expected in mid-summer.

We are maintaining our long-term Neutral recommendation on Verizon. Currently, the stock retains the Zacks #3 (Hold) Rank for the short term (1–3 months).