Subscribe
Financials Mergers & Acquisitions

Verizon’s XO purchase makes it part of the LMDS spectrum revival

Verizon has acquired XO Communications’ fiber business for $1.8bn, bringing it not just additional wireline capacity for backhaul as it densifies its LTE network, but also spectrum assets in the LMDS bands, which are enjoying their latest revival of interest on the back of plans for 5G in high frequencies.

XO controls 1.2m fiber miles in 40 major markets and has an intercity network connecting 85 cities, all of which will be useful to support Verizon’s fixed line and backhaul expansion, and reduce fees to fiber owners outside its fixed line footprint. But the deal also allows Verizon to lease XO’s LMDS spectrum – it has 102 licences in the 28 GHz and 39 GHz bands – with an option to acquire it before the end of 2018.

Verizon, which has expressed the intention of trialling pre-5G technologies in millimeter wave spectrum, is widely expected to use these LMDS airwaves to do so. “We feel XO’s spectrum allows us today to make some of the [5G] trials that we’re doing a little more robust,” Adam Koeppe, Verizon’s VP of network technology and planning, told a panel at Mobile World Congress. “We’ve got high band, low band, everything in between.”

According to Verizon, the deal brings additional financial benefits, including opex and capex savings and operational synergies, adding up to over $1.5bn.

The LMDS spectrum briefly inflated a broadband wireless bubble at the start of the century and may have its moment again as the mobile industry’s R&D attention shifts to high frequencies. Currently, these bands between 25 GHz and 40 GHz are mainly used for point-to-multipoint connectivity for WISPs and residential users, but small cell backhaul applications are emerging, and at the 5G stage, companies are looking to high bands for access too. Meanwhile, even higher millimeter wave bands are also playing a big role in 5G trials, looking beyond their current rarefied commercial applications in ‘wireless fiber’ point-to-point and backhaul – as already seen in the uptake of the 60 GHz WiFi-like standard, WiGig.

The 28 GHz LMDS and 39 GHz bands were originally seen as a vehicle for broadband wireless access, offering a lower cost alternative to fixed line DSL and three main US operators emerged in the last years of the twentieth century, backed by huge and speculative sums from major players like Microsoft and Craig McCaw. These were NextLink, Winstar and Teligent, but all three failed in the telecoms crash around 2000.

The three companies were all acquired at knockdown prices from out of Chapter XI – IDT bought Winstar, whose spectrum covered all 50 states and averaged 615 MHz in the top 200 markets, and then spun those assets off into Straight Path in 2013; First Avenue Networks bought Teligent with its 350 MHz of capacity in 75 markets and used this as the basis of a new backhaul business model, under the company’s newer name FiberTower; and XO Communications snapped up NextLink. A fourth player is Level 3, which bought TelCove, together with 300 licenses covering 90% of the US population, in 2006

VPS hosting