T-Mobile buying part of Verizon's spectrum in $3.3-bn deal

T-Mobile US Inc, through its wholly-owned subsidiaries, T-Mobile USA, Inc and T-Mobile License LLC, has agreed to purchase certain 700 MHz A-Block spectrum licences from Verizon Wireless for $2.365 billion in cash and transfer of certain AWS and PCS spectrum licences, which have an estimated value of about $950 million.

The transactions, combined with T-Mobile's own A-Block spectrum holdings in Boston, will result in T-Mobile having important low-band spectrum in 9 of the top 10 and 21 of the top 30 markets across the United States.

T-Mobile, majority owned by Deutsche Telekom, is the No 4 mobile service provider in the US.

The company, which has been using discounts to compete with bigger rivals, also badly needs more airwaves after falling behind bigger rivals AT&T Inc and Verizon Wireless in developing high-speed data services.

The additional airwaves would help the company buy out customers from rivals such as AT&T, Pacific Crest.

T-Mobile, which may itself be an acquisition target by Dish or Sprint Corp, also said on Monday that it hopes to buy additional spectrum in government auctions at the end of 2014 and in 2015.

Low-band spectrum covering approximately 150 million people will further improve customer experience in major metro areas, boosting in-building and breadth of network coverage, the company said in a statement.

''This is a great opportunity to secure low-band spectrum in many of the top markets in America,'' said John Legere, president and CEO of T-Mobile. ''These transactions represent our biggest move yet in a series of initiatives that are rapidly expanding our already lightning fast network and improving its performance across the country. We will continue to find ways to advance our customers' network experience just as our bold Un-carrier moves have shaken up the wireless industry to benefit consumers.''

These transactions will further enhance a rapidly improving network experience and enhance shareholder value, T-Mobile said.

Low-band spectrum substantially improves in-building coverage as well as coverage in rural areas. It also travels greater distances than high-band spectrum and therefore is a more efficient way to provide coverage at the edge of cities and in less densely populated areas, the company said.

Combined with its existing Boston A-Block holdings, T-Mobile will have low-band spectrum covering approximately 158 million people - including New York, Los Angeles, Dallas, Houston, Philadelphia, Atlanta, Washington DC, and Detroit.

T-Mobile anticipates rolling out service and compatible handsets on this A-Block spectrum as early as the fourth quarter of 2014.

In 2013, T-Mobile continued its rapid LTE rollout, deploying 10+10 MHz 4G LTE in 43 of the top 50 metro areas and it is commencing substantive deployments of 20+20 MHz 4G LTE in 2014. The company launched its nationwide 4G LTE network in 2013, which currently covers approximately 209 million people in 273 metro areas.

Also, as part of the transaction, the two companies will realign spectrum blocks in certain markets, primarily in northern California and the Atlanta area.

The agreements are subject to approval by the Federal Communications Commission and the Department of Justice, and other customary closing conditions. Following regulatory approval, T-Mobile expects these transactions to close in mid-2014.

TAP Advisors worked as financial advisors for T-Mobile on this transaction.