NTCA's The New Edge » M&A

AT&T and Dish: Rumor or Cage Rattling?

Steve Fravel — Wed, 01 Feb 2012 15:58:32 +0000

According to Credit Suisse analyst Stefan Anninger, a seven-page FCC exparte AT&T penned may be a strong indicator of the carrier’s interest in buying up the 40Mhz S-band spectrum currently controlled by Dish Network.

After separate bankruptcy proceedings last year, Dish Network now holds DBSD North America, Inc. and TerreStar Networks, Inc. and their satellite spectrum licenses. Dish recently petitioned the FCC for an ancillary terrestrial component waiver that it says it will use to provide a wireless-hybrid 4G LTE network.

In its letter to the FCC dated January 26, AT&T states that it supports Dish’s efforts to gain approval in transferring the DBSD North America and TerreStar licenses to facilitate the new service. However, AT&T is advocating an aggressive network build out for the service, requiring network availability to 100 million people in 33 months, arguing that Dish Network should be held to the same build-out schedule as that required of LightSquared, currently waiting for FCC approval for a similar venture.

The Dish build-out schedule request also may be a very strong signal that AT&T, currently trailing rival company Verizon in controlling requisite amounts of spectrum to support high-speed Internet and video services, has eyes on buying Dish Network.

AT&T abandoned the $39 billion T-Mobile USA acquisition at the end of 2011 after the Department of Justice and the FCC both issued notices opposing the deal. Considering the reversal AT&T is making in the January 26 letter on the Dish Network petition from comments filed late last year concerning the Dish Network project, AT&T may have revealed its purchase target in its quest to attain additional spectrum.

In a January 31 Bloomberg article on AT&T and Dish Network, Stefan Anninger of Credit Suisse values the Dish spectrum at $8.6 billion, using the recently announced and pending Verizon $3.9 billion purchase from Comcast, Time Warner Cable and Cox Communications of unused spectrum as his base of measure.

Industry Demands Scrutiny of Verizon-Cable Agreements

Jesse Ward — Mon, 23 Jan 2012 20:27:26 +0000

Last week Comcast and Verizon Wireless announced that they will launch a new marketing program in Seattle and Portland, Ore., selling their respective services to the other’s customers.

This is the first marketing promotion under the new landmark partnership which was announced last month, whereby Verizon Wireless agreed to pay $3.6 billion to a consortium of cable providers for 122 advanced wireless services (AWS) spectrum licenses covering approximately 259 million people, or more than 85% of the U.S. population. Additionally, the cable companies and Verizon Wireless entered into a joint re-sale, marketing and technology development agreement. Separately, just a few days later, Verizon Wireless entered into an similar agreement with Cox Communications to purchase 20 MHz of AWS spectrum licenses covering 28 million POPs for $315 million.

Under the trial promotion launched in the Northwest, customers who sign up for a two-year contract with Verizon Wireless and Comcast will be eligible to receive a prepaid Visa card, varying in value from $100 to $300 depending on which Comcast bundle is selected and the length of service contract. The prepaid Visa card is intended to be used toward the purchase of a smartphone or tablet.

To qualify, customers must purchase the Comcast and Verizon services within 14 days of each other, and must activate a new smartphone or tablet device. The initial joint offer is scheduled to end May 8, 2012.

In addition to this online offering, Comcast will promote Verizon Wireless services through its call centers and in its retail stores. For its part, 8 Verizon Wireless stores in the Seattle area will be staffed with Comcast reps for the initial retail launch.

The AWS spectrum sale and related agreements have not yet been approved by the FCC or the Department of Justice, the later of which announced back in December that it is investigating the proposed transactions.Verizon Wireless maintains that the marketing agreements are not subject to regulatory approval. For its part, the DOJ’s antitrust division maintains that it has the flexibility to look into all related aspects of a proposed transaction to determine if they will result in anticompetitive market dynamics.

Last week, at the request of FCC officials, Verizon Wireless and the cable companies — Comcast Corp., Time Warner Cable, Inc., and Bright House Networks LLC as part of SpectrumCo, and separately Cox Communications, Inc., — voluntarily submitted new information about the marketing agreements in order to avoid undue delay in the commission’s review of the spectrum transaction. However, the companies made it clear that they still believe the deals are not relevant to the spectrum transactions as they are not contingent upon one another. They also said that the FCC doesn’t have the authority to review them.

In a letter submitted last week to the commission, nine companies and public interest groups asked the FCC to require Verizon Wireless and the cable companies to publicly provide all of the documents related to joint marketing agreements so the market impact of the agreements can be reviewed. Entities signing onto the letter included C Spire Wireless, Directv LLC, Ntelos Holdings Corp., Sprint Nextel, T-Mobile, New America Foundation, Public Knowledge, Consumer Federation of America and Media Access Project.

Although they did not sign onto the joint letter, Fairpoint Communications and Frontier Communications are clearly impacted by Verizon Wireless’ partnership agreements. The two landline companies each acquired wireline network assets and customers from Verizon. Now they face competition from Verizon as it returns to these markets with LTE service offered through its new cable partner companies.

Petitions to deny the spectrum transactions must be filed with the FCC by Feb. 21, oppositions to the petitions are due March 2 and replies are due March 12 in WT docket 12-4.

AT&T Acquires Qualcomm’s 700 MHZ Spectrum

Steve Fravel — Fri, 23 Dec 2011 18:20:16 +0000

Although not the same magnitude as the T-Mobile merger, yesterday the FCC approved the sale of Qualcomm’s 700 MHz spectrum to AT&T. The commission attached a few conditions to the sale. The highly technical and specific conditions concerning interoperability and interference are described by FCC Chairman Julius Genachowski as potentially helpful to smaller operators.

The 700 MHz spectrum was originally purchased and used by Qualcomm to support its Media FLO TV product, a mobile video service which it shuttered in 2010. As such, the ironic aspect to this purchase is the increasing demand for additional bandwidth by consumers for watching video on AT&T’s mobile phones.

AT&T Ends Quest to Purchase T-Mobile USA

Jesse Ward — Mon, 19 Dec 2011 22:10:33 +0000

The biggest merger of the year is now dead. AT&T announced earlier this afternoon that it will end its bid to acquire T-Mobile USA, a quest which began in March of this year.

The statement, reads, in part:

“The actions by the Federal Communications Commission and the Department of Justice to block this transaction do not change the realities of the U.S. wireless industry. It is one of the most fiercely competitive industries in the world, with a mounting need for more spectrum that has not diminished and must be addressed immediately. The AT&T and T-Mobile USA combination would have offered an interim solution to this spectrum shortage. In the absence of such steps, customers will be harmed and needed investment will be stifled.”

In its statement, AT&T took this opportunity to encourage the FCC to meet the current and future spectrum needs of the wireless industry, including expeditiously approving AT&T’s acquisition of unused Qualcomm spectrum currently pending before the commission.

To reflect the break-up considerations due T-Mobile parent company Deutsche Telekom, AT&T will recognize a pretax accounting charge of $4 billion in the fourth quarter of 2011. AT&T had already set this money aside. Additionally, AT&T announced that it will enter a mutually beneficial roaming agreement with Deutsche Telekom.

Dish and T-Mobile?

Steve Fravel — Mon, 19 Dec 2011 21:25:44 +0000

According to Dish Network CEO Joseph Clayton, if the AT&T/T-Mobile takeover fails, Dish Network would be interested in exploring some partnering arrangements with T-Mobile.

Earlier this year Dish Network acquired two satellite companies and their spectrum out of bankruptcy. Dish has “hinted” strongly that it intends to provide a more diverse offering that will include video, broadband and voice services. T-Mobile is one possible partner. Early in the fall, Dish Network had openly talked about pursuing a deal with Sprint or Clearwire intending to provide a satellite-terrestrial hybrid service.

According to Clayton, “We’re not interested in making money on selling our spectrum. We want to use it to create a national wireless network, video, voice and data. We’ve got expertise in satellite TV, and we will in satellite broadband. The voice part, we’ll need some help with.”

Dish Network is currently on hold, waiting for FCC approval to use its acquired S-band spectrum.

Andreas Fuchs, a spokesman for T-Mobile USA, indicated that a deal with Dish Network is not being considered. He indicated that T-Mobile and parent company Deutsche Telekom are still pursuing the AT&T deal.

Verizon Wireless Adds Cox to its Cable Partners

Jesse Ward — Mon, 19 Dec 2011 16:53:59 +0000

Cox Communications announced December 16, that it has entered into an agreement to sell Verizon Wireless its 20 MHz Advanced Wireless Services (AWS) spectrum licenses covering 28 million POPs for $315 million. The deal plays on the joint venture announced by SpectrumCo. and Verizon Wireless which was revealed just a few weeks ago.

Cox and Verizon Wireless also announced that they plan to sell each other’s residential and commercial products and services through their respective sales channels. Over time, Cox may have the option to sell Verizon Wireless’ services on a wholesale basis. In addition, Cox expects to enter into arrangements with the innovation technology joint venture formed by Verizon Wireless and SpectrumCo. partners Comcast, Time Warner Cable and Bright House Networks, to better integrate wireline and wireless products and services.

“These agreements provide Cox customers with key enablers to mobility, such as access to Verizon Wireless’ 4G LTE network and iconic wireless devices,” said Pat Esser, president of Cox Communications. “We look forward to the many benefits this will bring to customers.”

The sale and transfer of Cox’s advanced wireless spectrum to Verizon Wireless is subject to approval by the FCC, and review under the Hart-Scott Rodino Act and other customary conditions.

As you may remember, Cox was initially involved in Sprint’s “Pivot” wireless venture along with Comcast Corp., Time Warner Cable Inc. and Bright House Networks. However, all the cable networks abandoned the service back in 2008. After Pivot Wireless fell apart, three of the big cable providers — Time Warner, Comcast and Bright House Networks – invested in Clearwire’s WiMAX venture.

For its part, Cox had grand plans to build its own wireless network, utilizing the spectrum it won in the FCC’s AWS and 700 MHz auctions. The initial idea was to utilize Sprint’s EVDO network, with Cox shifting users to its own LTE service once the network was built. However, Cox announced last month that it will no longer market its wireless service to new subscribers, and it plans to discontinue its current wireless service/subscribers on March 30, 2012.

Fast forward a few years and we now see the cable industry abandoning their wireless plans and turning en mass to Verizon Wireless for the wireless component of their quadruple-play bundles. In addition to new, powerful partnerships with leading cable companies – and their subscribers — Verizon Wireless has gained access to valuable wireless spectrum. It remains to be seen how this new alliances will change the landscape of the telecom industry and, as promised by the participants, how the companies plan to further integrate innovative wireline and wireless services.

AdTran to Acquire Nokia Siemens’ Fixed Broadband Unit

Jesse Ward — Mon, 12 Dec 2011 21:55:36 +0000

ADTRAN Inc., an NTCA associate member, announced today that it plans to acquire Nokia Siemens Networks‘ fixed line Broadband Access business (BBA) and associated professional services and network management solutions. The planned acquisition would include the Broadband Access intellectual properties, technologies and the established customer base.

Financial terms of the deal were not disclosed, however media reports peg the transaction at somewhere south of $24 million. Adtran said it plans to complete the deal through an asset sale and purchase agreement. The acquisition is expected to close in April 2012 and transfer about 400 Nokia Siemens employees to Adtran, including staff in engineering, R&D, sales and professional service, according to the companies.

The agreement also includes provisions which would allow ADTRAN solutions to be incorporated by Nokia Siemens Networks into its customer propositions, broadening ADTRAN’s business opportunities.

“Nokia Siemens Networks’ long-standing customer relationships, combined with ADTRAN’s long-term focus and financial strength, make this a very favorable outcome for customers, employees and shareholders. With this planned acquisition, ADTRAN will combine its success with the strength of Nokia Siemens Networks’ Broadband Access business to deliver a full portfolio of solutions to meet customer needs on a global scale,” said ADTRAN CEO Tom Stanton. “Service providers around the world are seeing high-bandwidth services as an integral component of their future opportunities. This strategic acquisition would position ADTRAN in key markets with an established customer base; complementary market-focused products; along with engineering, R&D, sales and professional services resources that will enable ADTRAN to take a significant step forward as one of the world’s leading communications solutions providers.”

“We believe that this planned divestment would provide our existing fixed broadband access customers with a continuous high-quality service from a company focused on their needs,” said Marc Rouanne, head of Mobile Broadband at Nokia Siemens Networks. “The planned sale is in line with our new strategy to increase our focus on the mobile broadband and services market.”

For more, see this release.

Fall Out from the SpectrumCo./Verizon Wireless Deal

Jesse Ward — Mon, 12 Dec 2011 21:02:43 +0000

The industry continues to experience fall-out from Verizon’s recently announced spectrum purchase and joint sales, technology and marketing partnership with the cable industry.

Comcast is moving quickly. While the spectrum sale will likely take up to 12 months to receive regulatory approval, Comcast Cable President Neil Smit announced last week that the cable company will begin bundling Verizon Wireless services in four markets in early 2012. ”The teams are already engaged; they are great commercial arrangements and we think we’ve put together great packages that combine the best of the various bundles,” Smit said, while speaking at a UBS investor conference.

The offerings may not be a quad-play of wireless, video, voice and data. Instead, Comcast may offer a triple-play containing three of the above products and/or a home security component. “It offers us a couple of different combination plays and ultimately more choice for the consumer,” Smit said. He also confirmed that Comcast will continue to compete with Verizon Wireless’ parent company Verizon Communications in markets where it offers its FiOS TV and Internet service.

In addition, Time Warner Cable also is pro-actively incorporating existing Verizon Wireless products into its bundled packages, starting almost immediately. However, speaking at the same investor conference, Time Warner Cable Chief Financial Offer Irene Esteves said it was too soon predict what new products it might bring to market with Verizon Wireless, or when those products will be available.

In related news, Clearwire is facing major repercussions from the spectrum deal. As you might remember, back in 2008, Comcast, Time Warner Cable, Bright House, Intel and Google invested in Clearwire. The plan was for the cable companies to utilize Clearwire’s planned nationwide WiMax network as the mobility component of their bundled packages. Unfortunately things did not go as planned. Clearwire’s funding did not stretch as far as it has planned, and new technologies such as LTE surpassed WiMax. All of the cable partners declined to continue funding Clearwire, which received a last minute cash infusion from its largest partner Sprint just last month.

As expected, Comcast confirmed last week that it plans to discontinue its customer relationships with Clearwire. Comcast’s Infinity2Go service, which utilizes the Clearwire network, will be taken offline during the next six months. However, Comcast said it plans to retain its 9% equity stake in the WiMAX provider “for the foreseeable future.”

On the heels of the spectrum deal and Comcast’s departure, Clearwire announced last week that it will seek $300 million in a new public equity offering. Sprint has said it will buy an undisclosed number of private voting shares of Clearwire.

For its part, last week Verizon CEO Lowell McAdam stated at an industry event that the company will now discontinue its fixed LTE trials with DirecTV. However, in a statement given to FierceWireless, Verizon spokesman Jeffrey Nelson maintains that the conclusion of Verizon’s trials with DirecTV were not a result of Verizon’s partnership with the cable companies. Further, Nelson reports that Verizon continues to hold discussions with DirecTV on LTE, although the company has nothing new to report out of the trial.

Verizon to Acquire Large Chunk of AWS Spectrum via Cable Companies

Jesse Ward — Mon, 05 Dec 2011 17:02:52 +0000

Verizon Wireless announced last Friday that it has agreed to pay $3.6 billion to a consortium of cable providers for 122 advanced wireless services (AWS) spectrum licenses covering approximately 259 million people, or more than 85% of the U.S. population.

As part of the purchase agreement with SpectrumCo LLC — a joint venture controlled by Comcast Corp. which includes Time Warner Cable, Inc. and Bright House Networks -– the cable companies will be able to re-sell Verizon Wireless services on a wholesale basis, adding wireless to their service bundles. For its part, Verizon Wireless also will be able to sell the cable companies’ services. It’s unclear at this time if Verizon will choose to market the cable companies’ wired services in areas where is also is the incumbent telco.

Additionally, the cable companies and Verizon Wireless said that they “have formed an innovation technology joint venture for the development of technology to better integrate wireline and wireless products and services.”

SpectrumCo’s sale and transfer of its advanced wireless spectrum to Verizon Wireless is subject to approval by the FCC and review under the Hart-Scott Rodino Act and other customary conditions.

SpectrumCo paid nearly $2.38 billion in 2006 for its spectrum holdings, which it won at the FCC’s AWS-1 auction. Technically, it was enough to make the venture the nation’s fifth largest wireless provider. There was speculation that the companies would attempt to build and operate a wireless network, but the majority decided to take a wait-and-see approach to their spectrum assets. Initially, the venture included Sprint Nextel Corp., which dropped out in 2007, and Cox Communications, which first attempted to build a wireless network and then withdrew its cards in 2009, taking cash and spectrum interests with it.

Of note, all of the cable companies which stand to benefit from this transaction also are investors in Clearwire. In fact, Comcast and Time Warner Cable now market Clearwire’s 4G WiMAX services. In all likelihood, this deal means that the cable industry will have to exit the Clearwire venture. It also raises questions about whether Sprint will have to take on additional equity to keep Clearwire afloat.

Needless to say, this arrangement also further shines a spotlight on the AT&T-T-Mobile acquisition, which AT&T has said is all about acquiring AWS spectrum. Verizon has just taken away one option by which AT&T could acquire spectrum if the merger does not go through as proposed.

For more, see this release.

Iowa Communications Network on the Block

Jesse Ward — Mon, 28 Nov 2011 20:09:53 +0000

The Iowa Communications Network (ICN), a statewide fiber-optics network, is going up for sale or lease. A special committee authorized by Iowa Governor Terry Branstad and the Iowa state legislature is outlining the parameters by which state officials will solicit offers for the ICN and its 8,661 miles of fiber optic cable by June 30, 2013. The bids will be solicited from private vendors.

The network, which was built in the 1990s with federal money using public transportation rights-of-way and is based in the Iowa National Guard’s command center, can be transferred into private hands only under specific circumstances. Of key importance, the local Gazette newspaper, which broke the news that ICN was on the block, states that a buyer or lessee would be allowed to use the network only to serve existing authorized users and must continue providing all products at a lower overall long-term cost.

Branstad has said he will entertain any viable offer when requests for proposals (RFPs) are released. “We recognize we need to look to the future and not be blinded by pride of authorship or something like that,” Branstad said in the Gazette article. “We’re going to look at this and see if this is something that makes sense for the taxpayers of Iowa and makes sense for the people who use the ICN system. I believe the ICN is a valuable asset and we want to see what the bidders feel that it’s worth.”

The ICN was constructed in 1989 primarily as a mechanism to deliver distance learning to Iowa’s public and private K-12 schools and colleges. Today, through partnerships with education, medicine, the judicial system, government agencies and the National Guard, the network brings live, full-motion video to more than 700 classrooms around Iowa, located in schools, National Guard armories, libraries, hospitals, and federal and state government offices. Services include full-motion video, video over IP, voice, data, WAN connection, and high-speed Internet via an expansive network of state-owned and leased fiber.

The RFP implementation team is scheduled to meet next week. Top on its agenda is compiling an estimate of the overall net worth of the ICN. It’s expected to range between $300 million and $400 million. However, it remains to be seen who will bid on the network and what it will be worth to them.

The ICN is often seen by private telecommunications providers as a government competitor which intrudes on the operations and success of the private sector. As such, any sale or lease arrangement likely would be closely reviewed to ensure that it does not negatively affect existing businesses.

For more, see this Gazette (Cedar Rapids-Marion, Iowa) article.