Shares of Verizon Communications (VZ) are trading down after the company this morning said it will pay $3.6 billion to buy wireless spectrum from a group of investors led by Comcast (CMCSA).
Walter Piecyk with BTIG Research opines that spectrum prices will continue to rise, as AT&T (T), Deutsche Telekom’s (DTEGY) T-Mobile USA unit, and DirecTV (DTV), among others, facing rising spectrum needs; MetroPCS (PCS), he contends, is “spectrum starved.”
Piecyk thinks someone could make an offer to Clearwire (CLWR) for some of its 160 megahertz worth of spectrum, even though the company just struck a funding deal with Sprint-Nextel (S) to continue to provide service on its spectrum. The time to make that offer is before the funding deal is finalized, as afterward, Clearwire probably won’t even consider a proposition.
Piecyk also sees Dish Networks (DISH) as big, big winners. Dish is spending $3 billion to lease 40 megahertz of spectrum.
“In the future, spectrum buyers will have to negotiate a deal with the likes of [Dish chairman] Charlie Ergen and Dish Networks, whose strategic value has risen dramatically over the past week,” he writes.
Sanford Bernstein’s Craig Moffett this morning writes that this morning’s deal “is the tip of the iceberg in what is a complete reordering of the competitive universe as we know it today.”
More important than the spectrum is the deal to co-market and develop and distribute products with the cable companies, Moffett thinks.
“This is a strategic masterstroke for Verizon, in our view.” For one thing, it means the cable guys will stop reselling Clearwire’s service in about six months from now, a negative for the company.
But more impor! tant, th e deal breaks down the barriers between wireless and cable:
The joint marketing venture is a reminder that a TelCo like Verizon is by no means a natural enemy of the cable industry. To be sure, they will continue to compete vigorously in FiOS markets… but FiOS reaches just 14% of U.S. households. Verizon Wireless is national. As Roberts put it, about 700 of Verizon Wireless’ approximately 900 stores in Comcast’s footprint are not in FiOS territory [��] The cable operators will also be able to resell Verizon Wireless service in a similar manner. In approximately four years’ time, they will be able to market their own branded services, using Verizon’s ????network, in perpetuity.
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