AT&T Inc agreed to buy embattled spectrum-license holder Straight Path Communications Inc in an all-stock deal valued at US$1.6 billion, as the telephone giant seeks to take the lead in the 5G network race.
Straight Path is one of the largest holders of 28 gigahertz (GHz) and 39GHz millimeter-wave spectrum — frequencies the US Federal Communications Commission has already approved to power the 5G wireless services.
With 5G, faster connections and greater capacity would help carriers like AT&T offer Internet speeds competitive with cable-TV operators while relieving congestion created by consumers who demand Netflix video and live sports streamed directly to their smartphones.
The carriers and gear-makers like Ericsson, Nokia Oyj, Qualcomm Inc and Intel Corp are projected to invest a collective US$200 billion a year on 5G, according to IHS estimates, and AT&T is planning to build a 5G network using so-called millimeter-wave spectrum.
The deal marks the second acquisition of high-frequency airwaves by AT&T this year. In January, the Dallas-based telecom behemoth purchased FiberTower Corp, which holds licenses for 24GHz and 39GHz bands of airwaves.
Straight Path’s spectrum licenses would allow AT&T to better compete with Verizon Communications Inc and T-Mobile US Inc as 5G networks roll out over the next several years.
Straight Path has billed itself as a leader in providing high-frequency airwaves for carrying traffic that is expected to grow as the 5G and the so-called Internet of Things blossoms: The company is the third-largest owner of spectrum licenses for airwaves that have been approved by the commission for flexible use with an eye toward 5G.
Verizon still has a wide lead against rivals in coverage with 28 GHz spectrum.
Wireless carriers use a measurement called megahertz-POP — the amount of bandwidth multiplied by the potential number of people covered by the airwaves. Verizon owns almost 200 billion Mhz-POP of 28GHz spectrum, more than 600MHz on average nationally.
T-Mobile controls 97.4 billion and Straight Path has 39.7 billion, a Bloomberg Intelligence analysis said.
“Many believe this ultra-high band spectrum will be key in a 5G world,” Wells Fargo analyst Jennifer Fritzsche wrote in a note. “This spectrum is for fixed wireless and is the basis of Verizon’s 5G strategy.”
Straight Path had a big incentive to sell following a settlement earlier this year with the commission. After finding the company had misrepresented the progress of putting its spectrum to use, the commission imposed a US$15 million fine and ordered Straight Path to transfer its 28GHz and 39GHz spectrum licenses by January next year and pay 20 percent of the proceeds from the sales.
If it does not, the company would have to fork over an additional US$85 million or relinquish those airwaves back to the agency.
AT&T is to acquire Straight Path for US$95.63 a share in an all-stock merger designed to be a tax-free reorganization, a statement released on Monday said.
That is a 204 percent premium to Straight Path’s closing price of US$31.41 on Jan. 11, the day before the company entered into a settlement with the commission, and a 162 percent premium to its closing price of US$36.48 on Friday.
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