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Straight Path Communications (STRP) Stock Skyrockets on AT&T (T) Buyout

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Shares of Straight Path Communications STRP opened more than 150% higher on Monday after wireless carrier AT&T (T - Free Report) announced that it would buy the holder of wireless spectrum licenses in a deal worth about $1.25 billion.

AT&T, which is the second-largest U.S. carrier, will pay $95.63 per share for the company. This price represents a premium of more than 160% from Straight Path’s previous closing price. The deal is an all stock-merger and is intended to qualify as a tax-free reorganization.

The buyout comes just a few months after Straight Path announced that it was hiring Evercore Partners, an investment bank intended to help the company explore its strategic options. Evercore advised Straight Path on the sale, and the merger was also supported by Straight Path’s largest investor, Howard Jonas, the founder of IDT Corporation IDT and Genie Energy GNE.

AT&T’s decision to pay nearly three times Straight Path’s stock price underscores the carrier’s desire to bolster its 5G portfolio. Straight Path currently holds the rights to 868 spectrum licenses in the 28 GHz and 39 GHz bands, which are both included in the FCC’s designation for the next generation of wireless broadband services.

“By becoming the first nation to identify high-band spectrum, the United States is ushering in the 5G era of high-capacity, high-speed, low-latency wireless networks," said FCC Chairman Tom Wheeler.

5th generation mobile networks are expected to be fully rolled out by 2020, and these new services could provide speeds of up to 100 times faster than today’s 4G networks.

AT&T has already made significant progress in the 5G race, and the carrier said it will launch its first “5G Evolution” networks in the Austin and Indianapolis markets in the coming months.

“Our 5G Evolution plans will pave the way to the next-generation of higher speeds for customers. We’re not waiting until the final standards are set to lay the foundation for our evolution to 5G. We’re executing now,” the company said about its 5G plans.

Today’s news comes just days after another major headline in the telecom space: Comcast’s CMCSA announcement of Xfinity Mobile. The cable giant, which competes with AT&T’s U-verse and DirecTV offerings, signaled its intent to get into the wireless service sphere with a new $45 per month unlimited data plan that is supported by Verizon’s VZ towers (also read: Everything You Need to Know About Comcast's Xfinity Mobile).

These recent acquisitions are just two in what is becoming a busy M&A space for the telecom business, an industry that is in flux as companies attempt to prepare for the future and satisfy changing consumer needs. For more on the trend, check out the latest episode of the Zacks Friday Finish Line podcast:


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