Broadband Cable Association of Pennsylvania

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December 5, 2013

AT&T Inc. is considering a bid for a block of spectrum licenses held by Verizon Wireless, setting up a potential contest for the airwaves with smaller rival T-Mobile US Inc., people familiar with the matter said. The block of airwaves is highly valued for its ability to carry signals for long distances and penetrate buildings. Verizon bought the spectrum for about $2.4 billion, and it is expected to command up to $2.75 billion in a sale, telecom analyst Jonathan Chaplin of New Street Research said. AT&T, Verizon and T-Mobile declined to comment.

AT&T, like other carriers, is looking around for spectrum to carry growing data traffic, and the Verizon airwaves fit well with its current holdings. T-Mobile, which the people familiar with the matter said is also considering a bid, needs the low-band spectrum to bolster its network, which runs primarily on higher frequencies. The two rivals are locked in a battle for customers. T-Mobile has targeted AT&T in its marketing in an effort to get customers to bring their phones to its network-and has successfully reversed a long streak of subscriber losses.

This summer, AT&T agreed to buy struggling Leap Wireless for $1.2 billion plus $2.8 billion in net debt in a move that was largely aimed at bolstering its spectrum holdings. The deal also kept the company out of the hands of T-Mobile. The Verizon spectrum is, technically speaking, in the "A block" in the lower 700 megahertz frequency. Availability of such spectrum is limited, and regulators have suggested there should be caps placed on ownership so that it isn't monopolized by industry leaders Verizon and AT&T, which already own roughly 75% of the low-band spectrum currently in use by wireless carriers.

A deal for the A-Block could complicate AT&T's effort to keep regulators from imposing ownership limits on lower-band spectrum in upcoming government auctions. T-Mobile and Sprint Corp. have argued for such limits. T-Mobile has raised about $4 billion via sales of stock and debt to build a war chest for acquiring spectrum. In the course of those offerings, the company disclosed it could buy spectrum from a "private party," and its executives have expressed a desire for lower frequency airwaves.

Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone PLC, previously tried to sell the airwaves and said recently that it remains open to a deal. The timing of any sale wasn't clear. The A-block has been seen as a particularly difficult piece of the airwaves for any owner, partly because it is on the edge of the frequency band and can suffer from interference from the adjacent channels, namely UHF channel 51.

Despite the view that the spectrum wasn't as useful, Verizon has insisted on not selling the licenses unless it gets an adequate price. Interference issues could be resolved after the Federal Communications Commission moves ahead with a planned auction of broadcasters' airwaves. Verizon said it would try to sell the A-block spectrum last year when it was seeking regulatory approval for a $3.9 billion deal to buy a different piece of spectrum from a group of cable companies. The sale of the spectrum wasn't required by regulators, and Verizon never reached a deal for the A-block, but it did sell adjacent airwaves, part of the so-called B-block, to AT&T for $1.9 billion as part of that process. Wall Street Journal

Dish Network Corp will compete against smaller wireless carriers and individual investors in the U.S. Federal Communications Commission auction of spectrum scheduled for January, the agency revealed on Wednesday. On January 22, the FCC will auction off the so-called H Block frequencies in the first opportunity that the FCC has had for companies to acquire new spectrum since 2008. Dish, which applied as American H Block Wireless LLC, is the most formidable of the 34 applicants who indicated an interest in bidding for control of airwaves in some geographic areas, according to new FCC documents.

Other applicants, who may or may not actually bid for wireless licenses in the auction, included Mississippi-based C Spire, other regional and rural providers and several individual investors, the documents showed. The FCC did not disclose which applicants were interested in particular licenses or how many of them. Earlier, Dish had pledged to bid $1.56 billion for the spectrum, if the FCC agrees to relax conditions related to its existing spectrum licenses.

The FCC has yet to make such an agreement, but that amount became the auction's base price, meaning that the H Block auction will not close until the FCC has raised $1.56 billion. The auction's proceedings are required to help fund a new network for emergency communications. Last month, Sprint Corp and T-Mobile US Inc said they had decided to not participate in the auction. The top two wireless providers Verizon Communications Inc and AT&T Inc had not been expected to be interested in the H Block spectrum. Reuters

Time Warner Cable Inc. said Dinni Jain will join the cable operator as its new chief operating officer, succeeding incoming CEO Robert Marcus. Mr. Jain is the former chief operating officer of Insight Communications, which Time Warner Cable acquired last year. He joined Insight in 2002 as chief financial officer and was named operating chief the next year. He will start in the new position Jan. 13, overseeing the company's three main businesses: residential services, business services and media sales. Mr. Marcus takes over as chairman and CEO on Jan. 1, replacing Glenn Britt, who will retire from both positions. Mr. Marcus joined Time Warner Inc. in 1998 and moved to Time Warner Cable in 2005, becoming its chief financial officer in 2008. Mr. Marcus has held his current role at the company since 2010. Mr. Britt's retirement plans were announced in July, though they weren't unexpected and Mr. Marcus was seen as a likely replacement.

Like other pay-TV operators, Time Warner Cable has been challenged by increased programming fees demanded by media companies that own TV channels, as well as more budget-conscious residential customers dropping video services. In response, Time Warner Cable has focused more on its broadband cable and business-services units, where profit margins remain higher. Building up the broadband business, the company in October agreed to buy regional fiber-optic network company DukeNet Communications for $600 million. Wall Street Journal

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