Feds OK Verizon, Sprint Deals With Some Caveats
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WASHINGTON -- Move over AT&T. The Federal Communications Commission today handed the top spot in the wireless industry to Verizon Wireless by approving its $28 billion acquisition of rural carrier Alltel.
The FCC blessed the merger with three full affirmative votes, with two of the five commissioners casting votes of partial dissent and partial concurrence. In clearing the final regulatory hurdle, Verizon becomes the biggest U.S. wireless carrier with 84 million customers -- about 10 million ahead of AT&T's (NYSE: T) subscriber base.
The commission also signed off unanimously on the merger of Sprint Nextel (NYSE: S) and Clearwire (NASDAQ: CLWR) , paving the way for the carriers to move forward with their ambitious $14.5 billion WiMAX project.
The votes came after a delay of nearly five hours as the affirming commissioners struggled to reach a compromise on how long the combined Verizon-Alltel entity would have to honor the two companies' existing roaming contracts with other providers. The order requires that the existing commitments remain in effect for four years. The commissioners who voted in partial dissent said they wanted the roaming requirement set at seven years.
The FCC actions put the carriers in stronger market positions in a highly competitive industry. Mobile device users are hungry for better data services and faster network access to deliver advanced mobile applications on an increasingly sophisticated crop of smartphones.
WiMAX promises to blanket entire cities with Web access for laptops, mobile phones and other wireless devices at speeds of up to five times faster than traditional wireless networks. Sprint, the No. 3 U.S. wireless carrier, is banking on such capabilities to reverse its slow market share decline in the past year.
Sprint CEO Dan Hesse recently told reporters that WiMAX could give Sprint and Clearwire the inside track in the race to a nationwide 4G network -- beating out larger competitors AT&T and Verizon Wireless, which are banking on the competing Long-Term Evolution (LTE) standard, which also promises faster and cheaper Internet services.
Sprint is due to report third-quarter earnings Nov. 4.
In acquiring Alltel, the country's fifth-largest mobile wireless provider, Verizon Wireless expands its markets into 34 states, including 57 rural markets that it doesn't currently serve.
Last week, the Department of Justice also approved the deal , although it stipulated that Verizon Wireless must sell off assets in 100 markets across 22 states as an anticompetitive safeguard.
To that list, the FCC added five markets where it found that Alltel significantly overlaps with Verizon Wireless, the joint venture of Verizon Communications (NYSE: VZ) and Vodafone (NYSE: VOD).
The divested spectrum in the 105 affected markets will be available to existing and emerging providers to spur wireless competition.
The twin approvals came in the same meeting where the commission took another notable step on the wireless front, approving the unlicensed use of the vacant spectrum that resides between TV channels known as white spaces.
White-space spectrum could be used to create a ubiquitous broadband network that would support a new class of wireless devices. The run-up to today's meeting had seen a vocal lobbying effort to delay a vote on white-space spectrum, with broadcasters warning that the devices would interfere with television transmissions.
Major tech firms such as Google and Microsoft had been advocating for freeing the white spaces as a path to introducing or enhancing advanced wireless data services.
Google (NASDAQ: GOOG) also invested in the Sprint's WiMAX venture. Under the complex arrangement, Clearwire would be reconstituted as a nationwide WiMAX provider, with Sprint holding a 51 percent stake. The existing entity of Clearwire would take a 27 percent share, with Google, Intel's Intel Capital unit, Comcast, Time Warner Cable and Bright House splitting the remaining 22 percent.