T-Mobile and Verizon sign spectrum agreement to help T-Mo expand 4G coverage

June 26, 2012
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I’m sure you recall that, just a few months back, we were all ready to forget about T-Mobile US. The smallest of the major US carriers seemed doomed, especially after the failure of the AT&T buyout. But surprisingly enough, T-Mobile, while still struggling to gain momentum against Verizon, AT&T, and Sprint, is more alive than ever and has announced a deal that could make it a serious challenger for the No.3 market position.

T-Mo will “purchase and exchange certain Advanced Wireless Services (AWS) spectrum licenses in 218 markets across the US” with… are you ready for this?… Verizon, according to a press release issued yesterday. That’s right, Magenta is looking towards Big Red to help it get out of the pickle it has gotten itself into these past couple of years, by extending its 4G mobile broadband coverage.

The transaction, once it will get approval, should improve T-Mobile’s spectrum position in 15 of the top 25 markets in the US, by “providing an opportunity for T-Mobile both to acquire additional AWS spectrum and to realign its existing spectrum holdings.”

It goes without saying that T-Mobile will hugely benefit from this deal, but you might ask yourselves what’s Verizon’s angle here. Well, there are two angles, as far as I can tell, one being that Big Red and T-Mo will “exchange” certain spectrum licenses, allowing the nation’s number one carrier to gain some extra coverage, too.

The financial aspect of the transaction is not to be ignored either, as Verizon will get some sort of compensation in addition to the license exchange. No numbers have been announced, but we’re guessing the deal will take a serious chunk of dough out of T-Mo’s pockets.

Talking about numbers, we should tell you that T-Mobile is estimated to gain spectrum covering 60 million people, in cities like Philadelphia, Washington, DC, Detroit, Seattle, Cleveland, or Milwaukee, while Verizon will get the chance to add 22 million people to its already rich portfolio of clients.

But there are two big hurdles in the way of the T-Mobile – Verizon deal, so for the time being, the transaction is far from final. Firstly, part of the spectrum T-Mo will be purchasing from Verizon is not yet technically Big Red’s propriety. Verizon is currently trying to make a deal with SpectrumCo, Cox, and Leap for certain spectrum licenses, and that transaction hasn’t yet been approved by the FCC and Department of Justice.

Furthermore, the T-Mo – Verizon transaction will itself need the sanction of the FCC and the Department of Justice and that might well take some time. T-Mobile is anticipating all approvals to be sealed “later this summer”, but something tells us that things might not go down as smoothly as the carrier thinks (or rather hopes).

In any case, it’s very interesting (and unusual) to see two competing companies that have every reason to try to cripple one another’s progress strike a partnership of this magnitude. And no matter if you’re a Big Red or Magenta fan, you should be happy to find out that the carriers are willing to bury the war hatchet from time to time, and try to make their clients more satisfied with their services.

Do you guys agree? Is this partnership a good thing for the US mobile industry? And does T-Mo stand a chance to challenge at least Sprint’s position in the market anytime soon? Let us know below.

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