Under terms of the deal, Verizon Wireless has agreed to buy Qwest Communications International Inc’s wireless assets for $418m. The deal will add call capacity in cities including Denver, Phoenix, Seattle, and Salt Lake City.
The deal adds spectrum in 62 markets, in 14 western and midwestern states, covering a population of 30.8 million people. The transaction includes cellular towers and network-switch centers.
There are a number of reasons for the deal. In April, Verizon Wireless CEO Ivan Seidenberg admitted the operator was always on the prowl for spectrum. Qwest’s network also uses the same technology as Verizon.
The clincher however was the cheap price of the assets. According to a number of analysts, the $418m Verizon Wireless is paying is almost a 50% discount from market value. Some analysts have estimated that the assets are worth at least $850m.
The transaction is expected to close in the fourth quarter or early next year, and requires government antitrust clearance and approval from the Federal Communications Commission.
The cash deal is also aimed at improving Qwest’s liquidity, as the Denver, Colorado-based carrier has been trying to sell its wireless assets for more than a year since it stopped offering its own wireless service and shifted its one million wireless customers to Sprint Corp.
Qwest is ranked as the number-four local phone provider in the United States, and like other Baby Bells has been hard hit by increased competition. It is currently trying to reduce roughly $17.5bn of debt.
Bedminster, New Jersey-based Verizon Wireless is a joint venture with the UK’s Vodafone Group Plc and Verizon Communications, and is still the number-one ranked US mobile operator until the $41bn merger of Cingular Wireless LLC and AT&T Wireless Service Inc completes later this year.
