Verizon’s agreement with T-Mobile earlier this week for a swap of AWS holdings to give both sides more contiguous spectrum within the AWS-1 band, raises a host of interesting possibilities for future transactions in the wireless space. UBS is speculating today that AT&T will dispose of its remaining AWS holdings, but it seems more plausible that AT&T could actually swap its remaining AWS spectrum (most of which is in the A-block or C-block and would naturally pair up with Verizon’s holdings in Los Angeles, Chicago, Dallas, Miami, Minneapolis and numerous other markets) for Verizon’s 700MHz B block holdings.
Although AT&T has more AWS spectrum (~1B MHzPOPs) than Verizon has in the 700MHz B block (just under 600M MHzPOPs), as I’ve noted before Verizon overpaid in the 700MHz auction to prevent AT&T from buying all of the B block, and so Verizon spent $2B on its B block spectrum whereas AT&T’s remaining AWS holdings only cost between $500M and $600M (and using the SpectrumCo transaction as a benchmark, would only be valued at around $700M today). By exiting its 700MHz B block holdings via a swap, Verizon would avoid having to take a loss on this expensive spectrum purchase, but it would be interesting to see whether money actually changed hands in such a transaction with AT&T (given that both companies have an incentive to talk up the value of spectrum, not least to make spectrum acquisitions more expensive for their rivals).
Of course, if such a swap proves infeasible (perhaps because of the significant discrepancy in price per MHzPOP) then it still seems unlikely that AT&T would announce a sale of AWS spectrum without some quid pro quo acquisition, either of Verizon’s B block, or more likely in conjunction with the purchase of DISH’s holdings (after terrestrial use of the AWS-4 block is approved by the FCC). In either case, I assume that a deal wouldn’t come until after the November 2012 presidential election.
Looking further afield, it now also seems less certain that the FCC will free up the PCS H block (which would require DISH’s uplinks to move up by 5MHz to 2005-2025MHz) when it gives DISH the go-ahead for terrestrial use of the DBSD/TerreStar AWS-4 spectrum band. As a result, Sprint might also find itself looking at swaps with smaller players such as MetroPCS and Leap to gain wider channels for its PCS G block LTE network (by using existing F block spectrum). In those circumstances, Leap and MetroPCS could potentially be paid money for a spectrum swap without necessarily giving up any capacity, assuming that Sprint gave them alternative PCS holdings in the lower part of the band instead, and this could prove interesting given the financial pressures that smaller carriers are under.