Verizon Fills Gap with Purchase of Cellular One Assets

Deals for Wireless Network and Cellular License on PA/NY Border

While Verizon’s blockbuster deal with the cablecos has ran into some friction of late, the wireless giant recently closed a much smaller transaction. On March 14, the company announced that it had completed its purchase of the operating assets of Cellular One of Northeast Pennsylvania from US Cellular for an undisclosed sum.

The deal includes US Cellular’s cell block B license KNKN800 along with the associated common carrier point-to-point microwave licenses, and Cellular One’s customers in Pike and Wayne Counties.  According to the 2010 census, the two counties are home to a combined population of around 110,197.  Cellular One began its operations in the region in 2000, starting with 8 cell sites and an analog cellular network. The company has since added a CDMA digital cellular voice network as an overlay and grown its cell tower count in the area to 23—assets Verizon will pick up with the purchase.

Although the deal is much smaller in scale than Verizon’s $3.6b spectrum buy from Comcast, Cox and Time Warner (among others), it fills a spectrum gap in Verizon’s Pennsylvania network.  The 800 MHz cellular license it acquired covers the Pennsylvania 5 market (CMA616).  While Verizon held 700 MHz, AWS and broadband PCS spectrum covering parts of Wayne and Pike counties pre-acquisition, it did not own any 850 MHz cellular licenses—the frequency band principally used in Verizon’s nationwide network. Pre-deal, PA5 was the lone market in Pennsylvania in which Verizon lacked control of an 850 MHz license. Post-transaction Verizon now owns 59 MHz of spectrum below 1 GHz covering the two counties.

According to its website, Cellular One of Northeast Pennsylvania serves approximately 50,000 mobile phone users, which Verizon will inherit.  In the near term, the transfer of ownership to Verizon should be transparent to these customers.  Verizon has indicated that it will continue to operate as Cellular One during the next few months while it converts the US Cellular network to Verizon specifications.

Down the line, Verizon’s newly acquired customers could be the beneficiaries of an upgraded network and faster speeds. In its application to the FCC, Verizon stated that it plans to deploy 4G LTE in the PA5 market.  Verizon also pointed to this planned investment to support its argument that the transaction serves the public interest and creates more competition in the region.

We have no details on the amount Verizon shelled out for the US Cellular assets; however it is unlikely there was a long line of bidders knocking on US Cellular’s door. AT&T, T-Mobile and Sprint already control licenses in the PA5 market, and the region is sparsely populated to begin with.  For Verizon however, the acquisition has a clear upside. It adds 50,000 wireless subs, and by filling its spectrum gap Verizon puts an end to the hefty roaming fees it had been paying in the PA5 market.