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December 2, 2011 6:05 PM

Four Firms Dial Up $3.6 Billion Verizon Wireless Spectrum Licenses Purchase

Posted by Tom Huddleston Jr.

UPDATE: 12/5/11, 2:10 p.m. EST. Willkie Farr & Gallagher served as lead counsel to Comcast in the transaction. The firm's team included communications and media partners Michael Hammer and James Casserly, and special counsel Michael Jones.

Verizon Wireless has agreed to purchase wireless spectrum licenses from a consortium of cable carriers known as SpectrumCo for $3.6 billion, the companies announced Friday. The deal will increase Verizon's bandwidth capacity and eventually let companies such as Comcast and Time Warner Cable—both of whom are on the selling side of the transaction—bundle Verizon's wireless service with their own offerings.

Syracuse, New York–based cable operator Bright House Networks is the third member of the joint venture selling 122 wireless spectrum licenses to Verizon. Under the terms of the agreement, Verizon will pay Comcast $2.3 billion, Time Warner Cable $1.1 billion, and Bright House $189 million for the licenses.

The growing use of smartphones and other mobile devices has put a premium on spectrum space, and competition over remaining bandwidth has grown to the point that the federal government is looking to cash in by auctioning off spectrum for commercial use in order to generate revenue. Basking Ridge–based Verizon said that the acquisition will give it enough bandwidth to serve 259 million customers.

Verizon's chief rival, AT&T, is still attempting to overcome strong regulatory opposition to a planned acquisition of T-Mobile that would increase AT&T's own spectrum capacity and push it past Verizon as the country's top wireless carrier.

To acquire the SpectrumCo licenses, Verizon has turned to longtime outside counsel Debevoise & Plimpton, according to a lawyer involved in the transaction. (A Debevoise press representative could not immediately confirm the firm's role in the matter.)

Debevoise has landed work on numerous Verizon deals in the past, including the company's $28.1 billion acquisition of Alltel in 2008. In 2009, Debevoise advised Verizon on several sales of rural assets required by the U.S. Department of Justice in order to gain antitrust approval for the Alltel deal. Among those transactions was a $5.25 billion sale of rural phone lines in 14 states to Frontier Communications.

Davis Polk & Wardwell is advising Philadelphia-based Comcast on the sale with a team that includes New York–based corporate partners David Caplan and William Chudd. Partners Avishai Shachar and Neil Barr are providing tax advice. Comcast has relied on Davis Polk for a number of major transactions, including its $30 billion acquisition of NBC Universal from General Electric in 2009.

Time Warner Cable, meanwhile, has turned to Paul, Weiss, Rifkind, Wharton & Garrison as its outside counsel on the spectrum license sale. The Paul, Weiss team includes New York–based corporate partners Ariel Deckelbaum, Robert Schumer, and Matthew Abbott. The firm advised New York–based Time Warner Cable in its spin-off from Time Warner Inc. in 2009, and recently led the way on a $3 billion acquisition of Insight Communications in August.

New York–based firm Sabin, Bermant & Gould is representing Bright House in the transaction according to a company spokeswoman.

Verizon's deal also includes agreements with the three cable companies to sell each other's services. Comcast Cable president Neil Smit wrote in a blog post Friday that four years from the signing of the agreement the three cable operators will have the ability to sell Verizon's wireless service and other products together with their own cable and Internet packages. Verizon will also sell the cable companies' products in its own retail stores.

That part of the agreement also likely ensures that the SpectrumCo consortium will not attempt to build its own wireless network to one day compete with market giants Verizon and AT&T, Bloomberg notes.

The transaction is subject to approval by regulators at the Federal Communications Commission, as well as review under the Hart-Scott Rodino Act.

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