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UPDATE 4-Verizon's bid challenges AT&T's offer for Straight Path -source

* New bid of $104.64 per share above AT&T's offer

* AT&T has five days to match or exceed new bid

* Straight Path shares up 12.5 pct (Adds analyst comment, adds detail on share price)

By Liana B. Baker

April 25 Verizon Communications Inc has made an offer for Straight Path Communications Inc, topping an earlier bid from AT&T Inc, in a move that starts a bidding war for a company holding spectrum used in 5G technology, according to a source familiar with the matter.

Straight Path said on Tuesday it received a $104.64 per-share all-stock buyout offer from a "multi-national telecommunications company". AT&T and Straight Path had agreed on a deal at $95.63 per share earlier this month.

The source did not want to be named because the matter is confidential. Verizon and Straight Path declined to comment.

A Verizon bid for Straight Path would be the latest salvo in the battle between Verizon and AT&T to gain an edge in the race to develop a fifth-generation network (5G) that would offer faster downloads and boost internet-reliant products such as self-driving cars.

"Clearly ultra-high band spectrum is a critical part of both AT&T and Verizon's 5G Plans" Wells Fargo analyst Jennifer Fritzsche said in a research note. "We believe it fair to assume (Verizon) would like to add to this part of its spectrum portfolio with the Straight Path assets."

Straight Path, which holds a large trove of 28 GHz and 39 GHz millimeter wave spectrum used in mobile communications, would give a new owner an advantage in 5G development.

Straight Path said on Tuesday that the higher offer was considered a "superior proposal" and it has notified AT&T that the telecom company has five days to match or exceed the new bid.

"We will evaluate the situation and make a decision in that time frame," AT&T spokesman Fletcher Cook said in an email.

Straight Path's shares were up 12.5 percent at $124.79, much above the offer price, indicating that investors are expecting an even higher bid to come in.

The new bidder has agreed to cover the termination fee of $38 million that Straight Path would be required to pay AT&T if it goes with another buyer, Straight Path added.

AT&T had agreed to buy Straight Path, which holds licenses to wireless spectrum, for $1.25 billion in an all-stock deal on April 10.

Reuters had earlier reported that Verizon Communications Inc was considering outbidding AT&T. (Reporting by Liana B. Baker in San Francisco; Additional reporting by Anjali Athavaley in New York and Supantha Mukherjee and Anya George Tharakan in Bengaluru; Editing by Shounak Dasgupta and Paul Simao)

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