Verizon: We'll sell 700 MHz spectrum to get cable companies' AWS spectrum

Verizon Wireless (NYSE:VZ) said it will sell all of its 700 MHz Lower A and B Block spectrum in exchange for getting regulatory approval to purchase AWS spectrum from a group of cable companies. Credit Suisse analyst Jonathan Chaplin noted MetroPCS, Leap Wireless and T-Mobile USA likely would be interested in purchasing Verizon's 700 MHz Lower A and B Block spectrum.

The latest twist in Verizon's quest to get AWS spectrum comes as the FCC and Department of Justice are weighing the transaction. According to Verizon, if it gets the AWS spectrum from the cable companies it will use that plus its Upper C Block 700 MHz spectrum to deploy LTE.

According to Credit Suisse, Verizon will auction 24 12 MHz A Block licenses covering 152 million POPs and 54 12 MHz B Block licenses covering 48 million POPs. Verizon spent a total of $9.36 billion on its 700 MHz spectrum during the FCC's 2008 auction, with around $4.4 billion of that going to A and B Block licenses.

An FCC spokesman did not immediately respond to a request for comment.

In December, Verizon agreed to pay $3.6 billion for the nationwide AWS spectrum licenses held by SpectrumCo, a joint venture of cable companies Comcast, Time Warner Cable and Bright House Networks. Separately, Verizon said it will buy Cox Communication's 20 MHz of AWS spectrum covering 28 million POPs for $315 million. All of the deals include the option of Verizon reselling cable services and cable companies reselling Verizon service. The cable companies can also become MVNOs of Verizon.

The FCC has consolidated the purchases into one review; the Department of Justice also needs to approve the deals. Verizon said it expects the deals to close by mid-summer. Various smaller carriers, including T-Mobile USA and MetroPCS (NASDAQ:PCS), have urged the FCC to block the deals.

Public interest group Free Press said the announcement demonstrated that Verizon is hoarding spectrum. "Verizon does not need cable's spectrum. Verizon already controls large swaths of unused beachfront airwaves that it could use to meet future demand," Free Press Research Director S. Derek Turner said in a statement. "Allowing Verizon to foreclose future wireless competition by gobbling up the valuable airwaves currently held by its cable competitors is clearly not in the public interest."

Verizon said it will begin the process of soliciting interest from potential buyers to ensure the process can move forward quickly once the AWS license transfers have been completed. Verizon hired Stephens Inc., an independent financial services firm based in Little Rock, Ark., to manage the sales process.