Verizon Communications won a bidding war against rival AT&T to acquire Straight Path Communications. Verizon's $3.1 billion all-stock offer comes a month after AT&T announced it was willing to pay $1.6 billion for the company. After AT&T's bid became public, Verizon made a play for Straight Path through a holding company. Verizon will pay $184 per share of Straight Path stock, nearly twice as much as what AT&T had offered. AT&T declined to match Verizon's offer, and Verizon will pay a $38 million termination fee on behalf of Straight Path for its now canceled deal with AT&T. The boards of Verizon and Straight Path have approved the deal, and it is expected to close within nine months.
The Straight Path deal could help Verizon achieve its goals to rapidly deploy a 5G network and connect even more Internet of Things (IoT) devices. Verizon is expected to begin piloting its 5G wireless network this summer in 11 markets, but the carrier has not revealed what speeds customers can expect from its new network. In the past, Verizon said that 5G will provide wider pipelines and faster lanes, which will reduce congestion and greatly increase speeds, and that customers can expect similar performance to home broadband.
When AT&T initially revealed its plans to acquire Straight Path Communications, it said that the spectrum that Straight Path owns can help it accelerate new consumer experiences, highlighting examples such as smart cars, augmented reality, smart cities, virtual reality, telemedicine and others. So far, Verizon has not stated how it will use Straight Path's millimeter-wave spectrum. Straight Path's mmWave spectrum license can transfer large amounts of data at high speeds. It also operates on a higher frequency band, so penetrating obstacles -- such as buildings and walls -- will be an obstacle. To combat this, carriers will likely need more antennas to achieve similar coverage to 4G LTE networks today.
Straight Path's mmWave license is particularly valuable for wireless deployment as it covers the entire nation, including the top 40 wireless markets, AT&T had said at the time. Straight Path Communications had recently come under fire with the Federal Communications Communication. The company recently settled a $100 million claim with the FCC. Under US regulations, spectrum licensees must use their licenses for their intended purpose, and the FCC claimed that Straight Path was squatting on its spectrum. The company also forfeited some of its spectrum licenses as part of the agreement with US regulators and must pay 20 percent of earnings from any sale to the US Department of Treasury.