Verizon Wireless plans to pay $3.6 billion for wireless airwaves from a venture of cable companies Comcast Corp, Time Warner Cable Inc and privately held Bright House Networks.
The deal, which includes the option for cable companies to resell Verizon Wireless service, comes as Verizon's biggest rival AT&T Inc is facing regulatory opposition for its proposed plan to buy T-Mobile USA.
Both Verizon Wireless and AT&T, the No. 1 and No. 2 U.S. mobile providers, are trying to improve their network capacity to support increased consumer demand for services such as mobile web browsing on devices like tablet computers.
Analysts said it made sense for Verizon to take the chance to get a deal done while AT&T is tied up with efforts to seek approval for its T-Mobile USA deal but some wondered why the cable operators did not wait.
It looks like a great deal for Verizon, said Pacific Crest analyst Steve Clement. You'd think from the cable guys' perspective if you wait a little longer there's more bidders -- potentially AT&T and maybe T-Mobile USA.
Comcast said, however, that the deal represented a 64 percent premium over the $2.2 billion price the cable consortium paid in 2006 for the wireless spectrum being sold to Verizon Wireless.
Another analyst saw the development of a reseller deal with Verizon Wireless as a strategy about-face for the cable operators, which compete with Verizon and AT&T in home telephone, Internet and television services.
The biggest surprise is that it aligns the cable companies with Verizon, one of their fiercest competitors, said Mizuho analyst Michael Nelson. The primary reason the cable companies formed this consortium and acquired this spectrum was to compete better with Verizon and AT&T.
The cable operators already resell wireless services in some markets using the network of Clearwire Corp, their venture with No. 3 U.S. mobile service Sprint Nextel.
It was not immediately clear from the statement whether the Verizon Wireless resale agreement will change their Clearwire arrangement.
Analysts said they expect the deal to be approved by U.S. government regulators, after a review.
Nelson said that Sprint Nextel could have been another potential buyer for the cable spectrum except that its hands are already full with Clearwire and it has already had to raise money for plans for a network upgrade.
This deal is likely the result of Sprint not having the balance sheet flexibility to buy the assets, Nelson said.
Credit Suisse analyst said the deal may push up the value of Clearwire's spectrum, particularly if AT&T fails in its efforts to buy T-Mobile USA - a deal it said it needed to bolster its spectrum holdings.
This limits the supply of spectrum available to all those carriers that have been more vocal about needing spectrum, which should drive up the value for other sources of spectrum, Chaplin said.
64 PERCENT PREMIUM
The cable companies and Verizon Wireless also said they have formed a joint venture aimed at integrating services, including potentially creating new mobile video applications.
The venture will be 50 percent owned by the cable companies and 50 percent by Verizon Wireless.
Comcast, owner of 63.6 percent of the SpectrumCo LLC venture that is selling the spectrum , will receive about $2.3 billion from the sale. Time Warner Cable, a 31.2 percent owner of the venture, will get about $1.1 billion and Bright House, a 5.3 percent owner, will receive $189 million.
Verizon Wireless is a venture of Verizon Communications Inc and Vodafone Group Plc. T-Mobile USA is owned by Germany's Deutsche Telekom.
Verizon shares were down 12 cents at $37.65 on the New York Stock Exchange where Time Warner Cable shares were up $1.70 or 2.8 percent at $62.62. Comcast shares rose 88 cents or almost 4 percent to $23.45 on Nasdaq.
(Reporting by Sinead Carew; editing by Gerald E. McCormick, Derek Caney and Gunna Dickson)