(Adds potential acquisition targets, context on 5G, updates
By Anjali Athavaley
April 10 AT&T Inc said on Monday it would
buy Straight Path Communications Inc, a holder of
licenses to wireless spectrum, for $1.25 billion in an all-stock
deal as it aims to accumulate the airwaves it needs for a next
The deal shows how wireless carriers may be increasingly
willing to pay lofty prices for assets they view as critical to
5G, which is expected to boast higher speeds and more capacity.
The network is widely considered to be a multibillion dollar
opportunity, and wireless carriers do not have many acquisition
targets that would give them the type of spectrum they need in
preparation for the roll out. Straight Path is one of the
largest holders of 28 GHz and 39 GHz millimeter wave spectrum
used in mobile communications.
The No.2 U.S. wireless carrier said it would offer $95.63
per share, a premium of 162.1 percent over Straight Path's close
on Friday. Straight Path's shares rose to $91.32 in
afternoon trade, while AT&T's shares were marginally lower.
Millimeter wave spectrum is expected to play a large role in
5G networks. Both AT&T and rival Verizon Communications Inc
have been conducting 5G trials. Verizon is testing a 5G
fixed wireless service with equipment maker Ericsson in 11
markets in the U.S. and expects a commercial launch as early as
2018. Meanwhile, AT&T said earlier this year that it had
successfully completed tests with Nokia that delivered
its streaming video service DirecTV Now over a 5G connection
using millimeter wave technology.
Earlier this year, AT&T said it was acquiring privately held
FiberTower and its millimeter wave spectrum rights. It expects
that deal to close by next January.
In February, Verizon Communications, the No. 1 U.S. wireless
carrier, said it had closed on its acquisition of XO
Communications' fiber-optic network business for about $1.8
billion, giving it access to millimeter wave spectrum.
Between FiberTower and Straight Path, AT&T should have a
similar amount of spectrum as Verizon if not more, said Wells
Fargo analyst Jennifer Fritzsche, in a note on Monday.
Shares of other telecom companies rose after the news as
investors expect a wave of mergers and acquisitions in the
sector this year. Dish Network Corp, which has been
amassing wireless spectrum licenses, was up 1.9 percent to
$63.75 in afternoon trading.
Dish as well as Ligado Networks, the wireless satellite
venture awaiting approval from the U.S. Federal Communications
Commission (FCC) to allow it to use its spectrum for 5G
purposes, are considered potential acquisition targets by
industry analysts. Ligado is working with financial advisers to
explore strategic alternatives, sources told Reuters in March.
Straight Path had said in January it was hiring investment
bank Evercore Partners to help explore strategic alternatives,
including a sale of assets.
The company had also agreed in January to pay the FCC $15
million to settle a federal probe of claims that it had
submitted false data to renew airwave licenses.
The tax-free deal, valued at $1.6 billion in total, includes
liabilities and amounts to be remitted to the FCC, according to
the January settlement terms. It is expected to close within a
year, pending FCC review.
The deal with AT&T is supported by Straight Path's majority
shareholder, Howard Jonas, who has entered into a voting
agreement with the carrier in support of the transaction.
Evercore advised Straight Path on the deal and Weil,
Gotshal & Manges LLP provided legal counsel, while AT&T was
advised by Moelis & Co and Kilpatrick Townsend & Stockton LLP.
(Additional reporting by Aishwarya Venugopal in Bengaluru and
Liana Baker in San Francisco; Editing by Shounak Dasgupta and