Verizon Wireless will acquire 122 AWS spectrum licences for $3.6bn, subject to approval

Verizon Wireless has announced that it will be acquiring Advanced Wireless Services (AWS) spectrum from a number of other US carriers in a bid to boost its LTE offering. The announcements as the US is facing a spectrum shortage, and Verizon’s rival AT&T is awaiting the outcome of its proposed merger with T-Mobile USA, which if blocked, will leave it needing more spectrum for its own operations.

Verizon intends to buy 122 AWS spectrum licences  from SpectrumCo, a joint venture between cable companies Comcast, Time Warner Cable and Bright House Networks. The firm will pay $3.6bn for the spectrum.

Comcast owns 63.6 per cent of SpectrumCo and will receive approximately $2.3bn from the sale as a result, whereas Time Warner Cable owns 31.2 per cent of the firm and will receive approximately $1.1bn.  Meanwhile, Bright House Networks owns 5.3 per cent, and will receive approximately $189m.

Verizon has also agreed terms for a spectrum swap deal with Leap Wireless. Under the terms of the agreement, Leap will acquire 12 MHz of 700 MHz A block spectrum from Verizon Wireless for $204m, and sell its excess PCS and AWS spectrum to Verizon in various markets across the US for $188m.

The companies anticipate that the transactions will close simultaneously, subject to regulatory approval.

In addition, Leap Wireless’ majority-owned venture, Savary Island Wireless, has entered into an agreement with Verizon Wireless to sell its AWS spectrum in various markets for $172m.

Verizon Wireless claims that by buying this AWS spectrum, it can bring even better 4G LTE products and services to its customers—and according to Sara Kaufman, an analyst at Ovum, the deal puts the carrier in a much stronger position to compete on LTE.

“Acquiring spectrum that it can use for LTE is a key objective for Verizon, and this deal gives it a lot of spectrum that it can use for its 4G services,” she said.

“AWS is not the preferred spectrum for LTE, but it can be used for it; T-Mobile has a great deal of AWS spectrum that AT&T is looking to gain for its LTE endeavours if that acquisition goes ahead, and I would imagine that this is entirely Verizon’s objective from this deal.”

The cable companies that co-own SpectrumCo were keen to sell spectrum, according to Kaufman, as they will be gaining large sums of cash for spectrum that they purchased some time ago with the intention of establishing wireless service. But the cable firms have not been successful in adding wireless to their portfolio of services and have not found the right formula to entice customers.

The cable companies also announced that they have entered into several agreements with Verizon, providing for the sale of various products and services.

Through these agreements, SpectrumCo’s co-owners and Verizon Wireless will become agents to sell one another’s products and, over time, the cable companies will have the option of selling Verizon Wireless’ service on a wholesale basis.

Additionally, the cable companies and Verizon Wireless have formed an innovation technology joint venture for the development of technology to better integrate wireline and wireless products and services.

“From my perspective, it seems as though that will favour Verizon in that the cable companies will very likely be selling more of Verizon’s services than the other way around,” commented Kaufman.

“For the cable companies, the spectrum that they hold is valuable, so this gives them a big influx of cash that they can use for more important, relevant objectives. At the same, they don’t close the door on being able to offer wireless, as Verizon has the brand and expertise to do that better, as is evidenced by their leading position in wireless,” she added.

The deal is subject to approval by the Federal Communications Commission (FCC), but Kaufman doesn’t anticipate any major resistance to the transaction.

“It’s certainly not a deal that is on the same scale as the T-Mobile-AT&T merger – and there’s been spectrum purchases that have happened in the past, so it’s not an unusual transaction for Verizon or spectrum holders, so I don’t anticipate the same kind of resistance to the T-Mobile acquisition,” she concluded.

Indian's BSNL wants a refund for spectrum after making heavy losses

India’s state-owned operator BSNL has offered to hand back its Broadband Wireless Access (BWA) spectrum for 17 states to the government, and is seeking a $1.67bn refund after making heavy losses.

The firm wants to hand spectrum back to the government after having made a loss of $1.2bn over the past 12 months, primarily due to high staff cost and payments made for acquiring 3G and BWA spectrum.

Last year, it paid over $1.7bn to the government for spectrum during the BWA auction, and was allotted non-standardised band of BWA spectrum for 21 states. However, the company still wants to retain its spectrum in the states of Maharashtra, Andhra Pradesh, Gujarat and Haryana.

Over the past 12 months, BSNL has paid more than 47 per cent of its total income in salary to its employees, and the firm is now preparing a voluntary retirement plan to staff as part of its efforts to revive the company.

Meanwhile, US chipmaker Qualcomm is set to receive its broadband licence, after it was told it could lose its $1bn investment and ISP licence that it won in the country’s BWA auction.

The firm paid for wireless spectrum in a state auction in four of India’s states. The ministry had earlier cited Qualcomm missing the deadline for applying for an ISP licence as one of the reasons for rejecting the application, and that it had applied for four separate licences, whereas it should have applied for just one.

However, the US firm has now confirmed that it has received a letter from India’s telecoms ministry, offering to grant the company a licence covering all the four states.

The company had previously said it fully complied with the application process and will work with the Indian authorities to resolve the matter.

Philippine operator PLDT is willing to sacrifice 10MHz of spectrum to get the green light to acquire rival Digitel

The incumbent operator in the Philippines has offered to give up some of its excess 3G spectrum, in an effort to clear the way for regulatory approval of the acquisition of a rival.

Philippine Long Distance Telephone Co (PLDT) is willing to offload 10MHz of its 3G frequency in an attempt to push through its bid to acquire rival Digitel, a source familiar with the matter told The Manila Times. At present, the PLDT group has a combined 25Mhz of 3G frequency.

The 25Mhz that the firm currently owns comes from acquisitions that the operator has recently made. 15Mhz of its spectrum is owned by subsidiary Smart Communications and another 10Mhz by Connectivity Unlimited Resources Enterprises (CURE), a company that Smart Communications had previously acquired.

The source said that PLDT is likely to give up the 3G frequency of CURE because it is in the lower frequency band. CURE’s uplink frequency bandwidth is in the 1955Mhz-1965Mhz range and its downlink frequency in the 2145Mhz-2155Mhz range.

Meanwhile, Smart’s frequency is in the 1920-1935 Mhz/2110-2125Mhz range, and so has the least amount of interference and allows for the clearest over-the-air transmission.

If PLDT sells off its 10MHz to gain the green light for the acquisition, it will be able to replace it with Digitel’s 10Mhz of 3G frequency, which is in the 1925Mhz-1945Mhz and the 2125 Mhz-2135Mhz range.

Another rival, Globe Telecom, had previously said that PLDT should divest its excess frequencies, particularly in 3G for re-distribution to Globe and other telcos, if it is to go ahead with the acquisition.

A Senate committee has looked into the proposed acquisition and has issued a report saying the deal complied with Philippine laws. The report added that there was no basis to indicate that the deal will restrain competition within the telecom industry or hurt public interest.

There is no spectrum shortage in the USA, but too much of it is in the wrong hands

Contrary to the Federal Communications Commission (FCC) warning of a “looming spectrum crisis”, there is no shortage of radio spectrum in the USA, according to analyst firm Citi Investment Research & Analysis. However, the firm warned, too much of the spectrum is in the wrong hands.

The company said that US carriers currently have 538MHz of spectrum, and there is an additional 300MHz of spectrum ready to be used, but only 192MHz is in use today.

In addition, 90 per cent of this in-use spectrum is allocated to 2G, 3G and 3.5G services.

“We do not believe the US faces a spectrum shortage,” the firm said.

“Too much spectrum is controlled by companies that are not planning on rolling out services or face business and financial challenges. And, larger carriers cannot readily convert a substantial portion of their spectrum to 4G services, because most existing spectrum provides 2G-3.5G services to current users.”

Stefan Zehle, CEO at consultancy Coleago, told Telecoms.com that the US telecoms industry needs to accept that inefficiencies are inevitable.

“In theory, if you gave all the spectrum to a single operator, that would be the most efficient way of doing it, from a spectrum perspective. But of course, that’s not the most efficient way to do it economically, as you end up with a monopoly,” he said.

“That is why you have to balance the need to have multiple operators and accept inefficiencies in the use of spectrum.”

He added that the issue is not limited to the US, which is relatively balanced. Problems are much starker in markets where there is less spectrum available and more operators, with India being a prime example.

One way many other markets have managed to ensure efficiencies in spectrum allocation is by introducing ‘use it or lose it’ provisions; if operators don’t use the spectrum within a specified period, they have to hand it back to the regulator, but according to Zehle, it will be difficult to implement this in the USA.

“These ‘use it or lose it’ provisions could be quite loose or quite prescriptive in terms of providing coverage in rural communities, for example. In May 2010, the auction in Germany had specific rollout obligation for the 800MHz digital dividend spectrum. This provision is used in a lot of markets, but not in the US, and that’s part of their problem.”

“It’s relatively easy to remedy if you have a new auction but it’s difficult to remedy once it’s done, because if you have assigned the right to the spectrum to someone and they’ve paid for it, it’s difficult to take that away.”

Bulgaria is seeking a fourth carrier

Bulgarian communications regulator the CRC has issued a tender for a fourth 3G licensee in the country. Prospective bidders will be allowed to submit applications for the UMTS licence until November 14, with the award due to take place December 7. The licence will be valid for 15 years and will consist of 2 х 15MHz blocks of FDD spectrum in the 2GHz band.

The initial price for the tender has been set at BGN49.5m (€25m), with a deposit of BGN2m required.

Bulgaria has a total of 7.3 million mobile subscribers, with a penetration rate of 144 per cent at the end of September. The market leader is MobilTel with 5.3 million subscribers at the end of September, followed by Cosmo with four million and Vivacom with 1.4 million users.

Alan Hadden, chairman of the Global Mobile Suppliers Association

As the demand for data from consumers continues to swell, the need to move from 3G to LTE is becoming ever more apparent to carriers. But while the technical and business cases are readily apparent, the real challenge is obtaining radio spectrum. Spectrum is the life-blood of every mobile operator and its scarcity makes its acquisition a difficult and usually expensive undertaking.

Fortunately the LTE standard can be deployed in a wide range of frequency bands, which enables operators to roll it out, at least initially, with whatever spectrum they have available. “The standard allows LTE to be deployed not only in different spectrum, but in different amounts of spectrum,” Alan Hadden, president of the Global Suppliers Association (GSA) tells Telecoms.com. He goes on to say that the standard has been defined to “recognise very much the individual needs either of a particular operator, country or region—or indeed globally.”

While this is a real plus for LTE it does present the problem of wide spectrum fragmentation. According to a recent report from Informa, (LTE Spectrum Strategies and Forecasts to 2016), LTE will be deployed in at least 20 bands worldwide, with a total of ten bands to be used in the Asia-Pacific region. In Japan alone, for example, there are seven bands that have been earmarked by operators.

As the Informa report observes, this lack of consensus over spectrum is a cause for concern. The uncertainly over when spectrum will be released by regulators and how much they will have to pay for it, is causing operators to hold back on deployments, which in turn is potentially slowing down the creation of a worldwide eco-system and stymieing efforts to create economies of scale around devices.

This issue is the prime reason why there is a delay in the production of LTE smartphones. Chipset manufacturers are looking to the operators before they commit, who are in turn looking to what is available from regulators and indeed what other operators are doing. According to Hadden this is why 700MHz is currently the most widely supported frequency for LTE—simply due to its use in the US, where LTE is most widely deployed. What the industry needs then is an awareness of what the most popular bands will be.

“You do have this huge quantity of spectrum options. But for a successful business what you need are standards, common agreements and international alignment. And what’s likely to emerge will be a series of prime bands, or core bands if you will, for LTE.”

According to Hadden the GSM standard is a blueprint for this double-band approach. “It’s a reflection of the success of GSM. GSM was a common band, and a second band was available So if you look at what’s happening in LTE; basically what are the common bands?”

The most popular approach, he says, is to go for a higher frequency band for adding capacity, and a lower frequency band for wider coverage using fewer base stations and in-building penetration. “New spectrum is coming, more or less, either at the higher capacity 2.6GHz level, which is an internationally agreed spectrum for these systems, and then also in the digital dividend space.”

In the US this digital dividend spectrum is the 700MHz mentioned above, which had already been freed up by June 2009.  In Europe however, this process is still in its early stages. According to Hadden, this is having an impact on Asian deployments, which he believes still looks to Europe for its lead in telecoms, if only due to economies of scale around devices.

“The licensing is sort of underway, but I think you need more of the major markets to have completed that allocation. If you look at the big markets whose decisions then impacts Asia, which are the major economies of France, Spain, Germany, Italy and the UK, then the question arises: Which of those has actually auctioned and allocated 2.6GHz?”

Hadden points out that, of these European markets, only Germany has actually deployed LTE. Spain has completed its auction, France is in the process of doing so and the others are all some way off.

As well as 2.6GHz, 1800MHz is also likely to be of great interest in Asia. “The real beauty of 1800,” Hadden says, “is that it’s already a common allocated band that can be used to deploy technologies other than GSM. And in many cases there is adequate spectrum that will allow a competitor to allocate 10MHz for LTE, and that’s really attractive. It’s clearly already happening and, as it does, the ecosystem will begin to support it.”

The evidence is certainly there to back up Hadden’s assertion. Telstra in Australia is starting to roll out LTE at 1800MHz, and is part of an 1800MHz alliance that also includes Deutsche Telekom and France Telecom, which can only help with economies of scale. Singaporean carrier StarHub has also announced plans to use 1800.

One country that looks as though it might be following a different path, though, is Japan. NTT DoCoMo is refarming its UMTS 2100MHz band for LTE, and has called on operators worldwide to show support by following suit, something that Hadden feels is unlikely.

“There will always be solutions found for specific requirements. While DoCoMo is a major player with major market reach, that doesn’t make 2100MHz a major band for LTE. I don’t think that what’s happening in Japan will spill out elsewhere.”

One Asian country that is likely to have an impact on the LTE market worldwide though is China. Its focus on TDD spectrum is being echoed around the world, with many operators choosing to use the technology. The attractiveness of TDD for operators stems from the fact that spectrum tends to be cheaper than FDD, while its time division nature is touted as a better match for the asymmetrical nature of internet use.

For Hadden, the tipping point though is the recent announcement by Clearwire in the US that it will be moving to LTE, using TDD technology. “It’s a positive outlook [for TDD] with the potential for a global standard.  It’s meeting needs and being tested. But what’s important about Clearwire, and with respect to the Chinese, is that it’s the first commitment in a well developed market.”

Ultimately, Hadden believes that identifying core bands is vital for the efficient development of LTE. Aside from 700MHz in the US, he believes that the dominant bands will be 800MHz, 1800MHz and 2.6GHz. While there may be another 16 other frequency bands in operation by 2016, it is these four that could form the basis of a global standard, delivering the benefits of economies of scale to operators and vendors, and the vital ability to roam worldwide for LTE users.

Alan Hadden, will be speaking at the sixth annual LTE Asia conference, which takes place in Suntec, Singapore, on the 5-7th September 2011

A lack of LTE spectrum harmonisation is to cause issues for vendors and operators worldwide

The fragmented nature of potential LTE spectrum across the world is slowing down operator decision making processes, a report claims. The LTE Spectrum Strategies and Forecasts to 2016 report from Informa Telecoms and Media, reveals that despite a near universal commitment to LTE as a standard, there is still widespread uncertainly over spectrum policy and availability worldwide.

Many regulators are unclear over when and where to free up new spectrum and this is forcing equipment and device vendors to make difficult choices over which frequencies to support in their chipsets, which in turn will have an impact on how quickly operators roll out LTE networks.

“Given the design and integration constraints associated with providing multiband support for LTE, device vendors and chipset providers in particular will want to consider the size of the global addressable market for each band, as well as regional band adoption patterns and band pairings, before configuring their products to support specific band combinations,” said Malik Saadi, principal analyst at Informa.

The report also identified a range of distinct pairings and groupings designed to provider operators with a combination of capacity and coverage.

• North America 700+2100
• Latin America 700+2100 ; 700+2600
• Asia Pacific 700+1800; 700+2100; 800+1800; 1800+2600; 2300+2600
• Western Europe 800+2600; 800+1800+2600
• Eastern Europe 800+2600; 1800+2600
• Africa 2100+2600
• Middle East 900+1800

While this flexibility can be seen as a positive for LTE, it means that the chipset manufacturers and OEMs need to take great care to understand what frequencies operators require in order to achieve economies of scale.

“Even before international roaming between LTE networks becomes an issue, the need to support intra-regional and even within-country roaming will govern band selection as part of the necessary rationalization of bands supported by LTE devices,” said, Julian Bright, senior analyst at Informa and author of report.

The report also notes the growing support for TD-LTE bands in markets outside of its traditional major markets of China and India. The Asia-Pacific markets also show the greatest diversity in LTE spectrum band adoption, with no fewer than eleven bands to be used.

The sixth annual LTE Asia conference, takes place in Suntec, Singapore, on the 5-7th September 2011

The big three won out in the LTE auction

Spain’s leading carriers shelled out more than €1.65bn between them in the latest round of LTE spectrum auctions to take place in Europe. Telefónica, Orange and Vodafone walked away with spectral spoils in the 800MHz and 2.6GHz band after an auction process last week.

Vodafone is the only operator to have been forthcoming about its plans, announcing it had won a total of 60MHz (2x30MHz) of new spectrum – 20MHz (2x10MHz) in the 800MHz band and 40MHz (2x20MHz) in the 2.6GHz band for a total consideration of €518m.

The 800MHz ‘digital dividend’ spectrum will become available in 2014 after the switchover from analogue to all-digital TV broadcasting in Spain. The 2.6GHz spectrum band is immediately available for use.

Vodafone Spain will also begin to offer 3G mobile internet access to customers in rural areas by the end of 2011 after receiving approval from the Spanish government to re-farm spectrum in the 900MHz frequency band currently used for 2G services. The Company has already begun to deploy versatile single Radio Access Network (RAN) base stations designed to handle 2G, 3G and LTE technologies on a common shared platform.

Could the Greek carriers be forced to pay through the nose for re-allocated 900MHz spectrum?

The Greek mobile market is in a spin this week after national regulator the EETT issued a proposal for the re-auctioning of GSM spectrum licenses which are due to expire in 2012. The move is controversial because it is an unusual renewal process, but also because the authority has set reserve prices at more than double the European average.

The obvious conclusion is that the Greek Government wants to use  the auction process to squeeze as much cash as possible out of the market’s operators in the face of the country’s sovereign debt crisis. A reserve price of €46.6m for each 5MHz block in the 900MHz GSM frequency band has been called “excessive” by one operator.

But one person close to the situation also suggested there are machinations at work to ensure ex-state owned incumbent Cosmote – seen as the only nationalistic choice by Greek citizens whose alternatives are Vodafone and Weather owned Wind Hellas – gets its hands on some valuable 900MHz spectrum.

As it stands Cosmote owns 25MHz of 1800MHz spectrum, while Vodafone and Wind hold 10MHz apiece of 900MHz spectrum, which has greater range. It is this 900MHz spectrum that will go under the hammer first. The reallocated spectrum would also be awarded on a technology neutral basis, giving operators the opportunity to deploy 3G or any other technology in the 900 band.

Commenting on the draft tender document made available this week, Nassos Zarkalis, CEO of Wind, said: “The approach used to set the price for the renewal of mobile spectrum is driven solely by short-term revenue gains and disregards the need for Greece to create a positive investment climate.  This sends the worst signal possible to international investors as they weigh up the pros and cons of bringing their capital and expertise to our country.”

It has been suggested by Stefan Zehle, CEO of spectrum auction specialist Coleago Consulting, that the operators could boycott the auction and choose not to bid in order to protest against the pricing. A similar situation arose during the French 3G allocation in 2001 when, at the time, the legal framework for auction did not exist in France. The French government fixed the price at a high level, based on the amounts that were paid for 3G licences in the UK and Germany and while SFR and France Telecom bought a 3G licence, Bouygues Telecom refused. The government wanted to preserve at least three operators in France and was forced to substantially reduce the price of the 3G spectrum licence.

In Greece, there is, theoretically at least, the potential for new entrants to come into play during the auction process, although the state of the country’s economy should be enough of a deterrent.

Despite opposition from the GPS industry, investors are still keen on LightSquared

Would-be LTE wholesaler LightSquared may be struggling to get around its opponents in the GPS industry, but that hasn’t stopped investors from beating a path to its door. The company announced today that it has raised an additional $265m in additional funding, bringing the company’s total investment haul for the past year to more than $2.3bn.

According to LightSquared, the capital was drawn from both existing as well as new investors; beyond that, it’s not naming names. The company further added that it would use the cash injection “for general corporate purposes, which includes constructing its world class 4G-LTE wholesale network.”

Chairman and CEO of LightSquared, Sanjiv Ahuja, said that latest round of financing “signals another endorsement by the financial markets of our business model and LightSquared’s intent to use private capital to build out a new network to meet the growing demand across this entire nation for wireless broadband access.”

Demand may well be there, but LightSquared’s fate currently lies in the hands of US regulatory authorities, currently being lobbied hard by the country’s GPS industry, which claims the company’s technology interferes with the GPS and poses a public safety threat. The carrier made an announcement two weeks ago claiming that it had resolved interference issues by switching bands but GPS industry body Coalition to Save Our GPS dismissed those claims as “bizarre.” A US House of Representatives committee followed on with a bill blocking the Federal Communications Commission (FCC) from granting LightSquared a waiver the company needed to move forward with its launch.

LightSquared had until July 1^st to deliver a report to the FCC detailing the results of a testing programme into the claimed interference. While the results have yet to be fully disclosed, early indications are that the proposed technology does interfere with a variety of public safety devices – something LightSquared continues to deny vigorously. The firm recently hit back against naysayers with the launch of its own public policy initiative, sponsoring a study that has found that the GPS industry in America receives and effective $18bn subsidy from the government because it uses GPS spectrum free of charge.