$2.4 billion deal provides T-Mobile with Verizon spectrum

T-Mobile US Inc. announced that it had agreed to buy airwaves from Verizon Wireless for about 2.4 billion dollars in cash. The acquisition is part of a spectrum swap that is expected to give both companies bigger network capacity in areas where they need it.

T-Mobile is considered as the fourth-largest wireless carrier in the U.S. As reported by Bloomberg earlier, the company made a statement yesterday saying that is going to purchase 700-megahertz A-block spectrum licenses from Verizon. According to the agreement between the two companies, Verizon, which is the largest wireless carrier in the U.S., will get the so-called AWS and PCS licenses. The combined value of the two licenses is estimated to about 950 million dollars.

Walt Piecyk, who is one of the analysts working for BTIG LLC said: “This is a big transaction for T-Mobile, but there are still additional pieces of low-band spectrum it can buy to compete the portfolio.”

A deal such as this one is quite beneficial to T-Mobile, because the company will acquire a great deal of low-band frequencies. Jim Alling, who is the Chief Operating Officer of the company shared, that this type of spectrum is the missing piece of the companys network coverage. At the same time, the so-called AWS airwaves of T-Mobile can be used by Verizon in order to relieve congestion in cities where network performance has suffered due to heavy traffic, as reported by Bloomberg earlier.

In addition, according to Markus Friebel, who is one of the analysts working for Independent Research GmbH, T-Mobile has all chances of becoming more attractive takeover target. He commented that the deal between T-Mobile and Verizon “will make T-Mobile a more viable operator, but also a more attractive acquisition target.” People familiar with the matter, who asked not to be named because the information is still not official, revealed that SoftBank Corp. has already discussed a merger between T-Mobile and Sprint Corp., which is its own U.S. carrier. SoftBank Corp. is planning to take control of T-Mobile by paying cash for the 67% stake, which Deutsche Telekom AG owns.

According to CNN Money, the current share price of T-Mobile US Inc. is 3.72% up, and its one-year return rate is 0.48% down. The 17 analysts offering 12-month price forecasts for T-Mobile US Inc. have a median target of 32.00, with a high estimate of 38.00 and a low estimate of 12.00/ The median estimate represents a -4.42% decrease from the last price of 33.48.