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Verizon Gains Wireless Assets

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The largest U.S. mobile service provider, Verizon Communications Inc. (VZ) has strengthened its asset base by completing the acquisition of U.S. Cellular Corporation’s (USM) wireless spectrum in Missouri. The news, however, failed to excite shareholders as the stock price ended down by 0.60% – in the last trading session.   

The 25 MHz Cellular A spectrum block is located in the rural areas of Missouri and will enhance Verizon’s presence in the south of St. Louis, St.Francois, Ste. Genevieve and Washington. Verizon will also win U.S. Cellular’s customers and get hold of other related CDMA operations in the area. The financial details of the transaction have not been disclosed so far.

The spectrum acquired by Big Red covers an area of 1,700 square miles and a population of 110,000. Verizon will keep U.S. Cellular’s brand name in the region until the network is compatible with Verizon’s nationwide Long Term Evolution (:LTE) network, which is expected in mid 2014.

This is Verizon’s second spectrum-related transaction with U.S. Cellular in more than two years after the firm entered into a spectrum swap deal in Sep 2011. The deal provided Verizon with eighteen 700 MHz spectrum licenses covering eight states.

New York based Verizon remains the leading provider of wireless voice and data communication services in the U.S. as its superfast LTE network is now available in more than 500 markets covering 97% of the U.S. population.

We believe Verizon’s quest for wireless airwave does not come as a surprise as all the leading U.S. carriers are investing a lot of cash to ramp up their spectrum portfolio either through swap deals or by purchasing it from smaller counterparts.

U.S. Cellular has only been a victim of this aggression by the nation’s leading telecom operators. In Nov 2012, the company struck a $480 million deal with Sprint Corp. (S) under which it sold personal communications service (:PCS) spectrum in certain areas to approximately 585,000 customers. Recently, U.S. Cellular also signed an agreement to sell its non-strategic spectrum in the Mississippi Valley to a wholly owned subsidiary of T-Mobile U.S. Inc. (TMUS) for $308.0 million.

Verizon currently carries a Zacks Rank 3 (Hold).

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