AT&T Buys Straight Path Communications in $1.6 Billion Deal

AT&T will purchase embattled spectrum-license holder Straight Path Communications for $1.25 billion in stock plus liabilities to gain access to the millimeter-wave spectrum holder’s cache of 28 GHz and 39 GHz frequencies.  The deal objective is to enhance AT&T’s 5G capabilities via Straight Path’s holding of 28 gigahertz and 39 GHz millimeter-wave spectrum — frequencies the U.S. Federal Communications Commission has already approved to power fifth-generation (“5G”) wireless services.

Author’s Note:

The ITU-R WP 5D which has responsibility for standardizing “5G” as IMT2020, has agreed that “terrestrial IMT-2020 systems will incorporate the use of new technologies that benefit from the physical characteristics of the frequencies in the frequency range from 24.25 to 86 GHz and the large bandwidths potentially available which will provide higher data rates and lower latencies.”

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The deal marks the second acquisition of high-frequency airwaves by AT&T this year. In January, the Dallas-based telecom behemoth purchased FiberTower Corp., which holds licenses for 24 GHz and 39 GHz bands of airwaves.

The deal comes after the U.S. government sanctioned Straight Path in and ordered it to sell its spectrum holdings or face an $85 million fine as part of a settlement related to fraud allegations brought against the company.

Straight Path’s spectrum licenses will allow AT&T to better compete with Verizon Communications Inc. and T-Mobile US Inc. as 5G networks roll out over the next several years.

Straight Path Communications has billed itself as a leader in providing high-frequency airwaves for carrying traffic that will grow as “5G” and the Internet of Things gain market traction.  The company is the third-largest owner of spectrum licenses for airwaves that have been approved by the FCC for flexible use with an eye toward 5G.

Verizon still has a wide lead against rivals in coverage with 28 GHz spectrum. Wireless carriers use a measurement called megahertz-POP — the amount of bandwidth multiplied by the potential number of people covered by the airwaves. Verizon owns almost 200 billion Mhz-POP of 28 GHz spectrum, more than 600 MHz on average nationally. T-Mobile controls 97.4 billion and Straight Path has 39.7 billion, according to a Bloomberg Intelligence analysis.

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“The merger of AT&T and Straight Path Communications marks a vital point for us,” Straight Path CEO Davidi Jonas commented. “Importantly, this merger provides Straight Path shareholders with a compelling return since Straight Path’s spin-off to become an independent public company in 2013, with an initial price per share of $6.40 on July 31, 2013.”

The companies indicated the merger is expected to close within 12 months, subject to FCC review.

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Wells Fargo Senior Analyst Jennifer Fritzsche in an April 10, 2017 note to clients opined that:

“This ultra-high band spectrum has fairly limited propagation characteristics, which likely means the spectrum needs to be within several hundred feet of a fiber-fed base station. We have long thought AT&T was in the early innings of its fiber deployment, and this announcement gives us more conviction in this view. It is worth noting this fiber build or leasing could even occur outside of its incumbent footprint to realize the full benefits of this spectrum.”

Wireless Week noted that “AT&T also seems to be moving down a fixed wireless path as part of its 5G roadmap.”

In a successful trial with Nokia earlier this year, DirecTV Now (Internet TV) content was streamed via a fixed wireless 5G connection in the 39 GHz band.

AT&T will be conducting a 5G video trial in Austin in the first half of this year that lets customers stream DirecTV Now over a fixed wireless 5G connection and also announced plans to conduct additional fixed and mobile 5G trials in the second half of 2017 in the 28 GHz and 39 GHz bands.

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References:

https://www.bloomberg.com/news/articles/2017-04-10/at-t-to-acquire-straight-path-in-deal-valued-at-1-6-billion

https://www.wirelessweek.com/news/2017/04/t-scoops-straight-path-16b

 

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