T-Mobile USA and Verizon reach spectrum swap deal

US carriers T-Mobile USA and Verizon Wireless have agreed to exchange Advanced Wireless Services (AWS) spectrum. T-Mobile has also given up its opposition to a prospective deal that would see Verizon Wireless acquiring spectrum from a group of US cable companies.

Under the agreement, T-Mobile will gain spectrum covering 60 million people, in exchange for its own spectrum covering 22 million people plus an undisclosed cash payment - reportedly in the region of around $260m. The deal will improve T-Mobile's spectrum position in 15 of the top 25 markets in the US, the operator claimed.

The exchange of spectrum will enable two firms to create more adjoining blocks of spectrum to re-align spectrum in adjacent markets.

“T-Mobile has been one of a number of companies that was opposed to Verizon’s deal with cable companies, which the Federal Communications Commission (FCC) is considering at the moment, along with other US government bodies,” said Jan Dawson, analyst at Ovum. “The fact that T-Mobile is saying it has changed its mind and it quite likes some of the spectrum that is going to become available because of that deal, and so it is now going to support it rather than oppose it - that doesn't guarantee that the deal will go through at all, but it is significant that one of the big opponents has now switched sides.”

There has also been much made of a spectrum shortage in the US crippling operators. However, Dawson believes that rather than a shortage, in certain places and on certain networks, the spectrum that is available is becoming constrained.

“It's a local issue and it varies a great deal by operator. T-Mobile and Verizon are swapping spectrum because Verizon, as a result of the deal with cable companies, will end up with the spectrum it needs, but also a surplus in some markets. T-Mobile, conversely, has a surplus in some markets but a shortage in others, so it's a matter of solving those local spectrum crunches in this particular deal.”

Dawson added that in the longer term, however, all US operators are going to need more spectrum as customers will be using more data and consumption will rise.

“So there is a longer term need, and the FCC is eventually going to have to find more spectrum to auction. It has been trying to work with broadcasters to make their spectrum available for 4G services, but this is a contentious issue, because broadcasters are not keen on giving it up and moving to new bands and other technologies.”