Verizon’s Strategy In Acquiring Straight Path

Almost a week ago, Straight Path had announced that it had struck a merger deal with Verizon Wireless that will effectively have the biggest wireless carrier in the United States pay about $3.1 billion (by way of an all stock transaction) in order to acquire Straight Path. The Big Red was in a hotly contested bidding war with AT&T (the number two mobile operator in America) for the spectrum holder’s airwaves. Verizon will also be paying AT&T a termination fee in the amount of $38 million.

So why is the Straight Path acquisition a good move for Verizon Wireless? According to Moody’s Investors Service, the purchase will help immensely in putting the Big Red in a prime position to further expand its 5G spectrum, while at the same time, affording the industry leader an opportunity to prevent rival AT&T from similarly improving its spectrum licenses.

Straight Path happens to hold an average of 620 MegaHertz in the top 30 mobile markets in the United States. Moreover, it currently covers all of America with 39 GigaHertz airwaves, while at the same time, holding 28 GigaHertz airwave licenses. No wonder AT&T was so eager to get hold of the spectrum holding firm -- a month ago, the carrier had announced its intention of acquiring Straight Path for a sum of $1.6 billion, but Verizon Wireless has since trumped that bid at almost two fold the original amount.

It is no secret why major US wireless carriers are all trying to get their hands on as much high band airwaves as possible. In the race to be among the first to offer a true 5G network, having a wealth of spectrum essentially allows mobile operators to increase network capacity, making it easier for them to lay the foundations for a quality 5G offering.

AT&T may have lost the bidding war to Verizon Wireless, but it still has a number of options available to it in trying to acquire more spectrum. According to a report published by Reuters over the weekend, Globalstar is apparently also considering selling itself to a carrier. Reuters’ report stated that Globalstar’s stock had improved almost 21 percent so far this year through Thursday of last week, and then rose an additional 30 percent last Friday, after rumors of a sale started circulating around.

As for Verizon Wireless, it made up for not participating in the Federal Communications Commission’s recent incentive auction of 600 MegaHertz spectrum by bagging a significant prize in the form of higher band airwaves through its acquisition of Straight Path.