Comcast, TWC And BHN Sell Spectrum To Verizon Wireless For $3.6 Billion

SpectrumCo -- a joint venture of Comcast, Time Warner Cable and Bright House Networks -- will sell its 122 Advanced Wireless Services spectrum licenses covering 259 million people in the U.S. to Verizon Wireless for $3.6 billion, the companies announced Friday.

The companies also announced that they have entered into several agreements that will let the MSOs and Verizon Wireless become agents to sell one another's products and, within about four years, the cable companies will have the option of selling Verizon Wireless' service on a wholesale basis.

SpectrumCo paid $2.37 billion for 137 AWS licenses in October 2006 in a Federal Communications Commission auction.

Originally, the JV included Sprint Nextel and Cox Communications. Sprint sold its 5% interest in SpectrumCo in 2007. In January 2009, SpectrumCo redeemed the 10.9% interest held by Cox, which received AWS licenses primarily covering areas in its cable footprint and approximately $70 million in cash.

The SpectrumCo AWS licenses sold to Verizon Wireless cover more than 80% of the U.S. population. The AWS band covers frequencies in two segments -- from 1710 to 1755 MHz for uplink, and from 2110 to 2155 MHz for downlink -- and is intended to be used by mobile devices for data, video and messaging services.

In a statement, the three cable companies and Verizon Wireless said, "This sale of spectrum is an important step toward ensuring that the needs and desires of consumers for additional mobile services will not be thwarted by the current spectrum shortage. While government action to free more spectrum is expected, this transaction ensures that the spectrum which is already available for mobile services is used effectively to serve customers."

Comcast owns 63.6% of SpectrumCo and will receive approximately $2.3 billion from the sale. Time Warner Cable owns 31.2% of the JV and will receive approximately $1.1 billion, while Bright House Networks owns 5.3% and will receive approximately $189 million.

In addition, 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.

Comcast president Neil Smit said in a statement, "These agreements, together with our Wi-Fi plans, enable us to execute a comprehensive, long-term wireless strategy and expand our focus on providing mobility to our Xfinity services. We're excited about this partnership with Verizon Wireless and the future innovations we will bring to consumers."

Dan Mead, president and CEO of Verizon Wireless, said, "Americans deserve excellence from a wireless service provider, and innovative wireless companies plan ahead in order to deliver on that expectation. Spectrum is the raw material on which wireless networks are built, and buying the AWS spectrum now solidifies our network leadership into the future, and will enable us to bring even better 4G LTE products and services to our customers. American businesses and consumers can have confidence that the best wireless network has the foundational resources to deliver on that promise."

Time Warner Cable president and chief operating officer Rob Marcus said, "We're excited to be able to offer the nation's best wireless services to our customers and to have Verizon Wireless as a sales channel for our superb wireline services. We're also pleased to have obtained an attractive price for the spectrum we're selling."

Bright House Networks CEO Steve Miron added, "We are always looking for ways to provide new and exciting product offerings for our customers. We look forward to working with our partners through these agreements toward achieving that end goal to add additional value for our customers."

The deal is subject to approval by the Federal Communications Commission and Department of Justice, along with other customary conditions.

National Association of Broadcasters executive vice president of communications Dennis Wharton said the deal "highlights the importance of actual deployment of spectrum that has been previously reallocated. The agreement should be viewed as an extremely positive development in the debate over a ‘spectrum crunch.' Going forward, we're hopeful that other companies sitting on idle spectrum will be encouraged to deploy those valuable airwaves for the benefit of consumers."

Separately, Comcast, Time Warner Cable and Bright House are each investors in Clearwire, a provider of 4G WiMax services, and have wholesale distribution agreements to resell Clearwire service.

Cox, meanwhile, retains ownership of AWS licenses as well as spectrum licenses in the 700-MHz band, which it acquired in the FCC's 2008 auction of the digital TV airwaves for $304.6 million. The MSO intended to build its own 3G -- and, eventually, 4G -- wireless networks but ended those plans in May 2011 and said it would rely on Sprint's 3G network to provide mobile voice and data services. Last month, Cox said it would exit the wireless retail business altogether, and will discontinue service effective March 30, 2012.