AT&T Swaps Assets with Verizon; Buys Edge Wireless
AT&T continued its wireless network expansion, revealing this week an asset swap with Verizon Wireless to meet Dobson divestiture requirements, and acquisition of regional carrier Edge Wireless to expand its GSM network in the Pacific Northwest. AT&T is hungry to grow its network so it can gain a competitive edge marketing against rivals, analysts said.
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AT&T and Verizon will exchange assets they must divest to finish acquiring Dobson Communications and Rural Cellular. AT&T picks up Rural licenses, network assets and subscribers in the Burlington, Vt., metro area, plus rural areas in New York, Vermont and Washington. AT&T also gets a cellular license from Verizon in Kentucky. In exchange, Verizon gets former Dobson licenses, network assets and subscribers in Kentucky. Verizon also gets 10 MHz of PCS spectrum “in a number of markets” and an undisclosed “additional cash consideration” from AT&T, said AT&T.
To satisfy remaining divestiture requirements related to Dobson, AT&T agreed to sell the Cellular One brand to Trilogy Partners. It also agreed to sell Dobson assets in Texas and AT&T’s share of its Dobson partnership holdings in Oklahoma to MTPCS. No terms were disclosed. All transactions related to Dobson divestiture, including the AT&T-Verizon swap, were signed Monday and need FCC and Justice Department approval.
AT&T and Verizon’s announcement is “very routine” for carriers needing to satisfy divestiture requirements, said Wintergreen Research analyst Susan Eustis, comparing it to “sweeping up the kitchen floor when you're done eating.” Regulatory approval should come easily, since divestiture rules are “strict and well-spelled out,” she added. That AT&T and Verizon use different network technologies -- GSM for AT&T and CDMA for Verizon -- “is not particularly a problem,” said Eustis. The Bells initially will run them as standalone units on existing technology and upgrade later, she said.
Meanwhile, AT&T agreed through an affiliate to acquire full ownership of Edge Wireless, an operator with about 172,000 subscribers in the Pacific Northwest. AT&T previously held a 35.7 percent minority interest in the company. Edge assets “will complement AT&T’s existing GSM networks in northern California, Oregon, Idaho and Wyoming,” AT&T said. The deal needs FCC and DOJ approval; AT&T expects a mid-2008 closing, it said. Financial terms were not disclosed.
Network integration should be easy since both are GSM, but merging billing systems could be a problem, Eustis said. Still, AT&T has dealt with billing differences before and “seems to be able to manage,” she said. Getting regulatory approval should be “straightforward,” she added.
Grabbing small carriers like Edge and Dobson is part of an AT&T “marketing ploy,” Eustis said. AT&T is “working really hard to say it has the biggest network and the most subscribers,” she said. The strategy is not AT&T’s alone, said Current Analysis’s William Ho, citing T-Mobile’s SunCom acquisition and Verizon’s Rural Cellular and West Virginia Cellular buys. “Carriers are looking for smaller carriers to expand their reach as national wireless penetration closes in to 90 percent.”