Verizon Communications Inc. (VZ) Yes, AT&T Inc. (T) No? It’s About Spectrum!

Verizon Communications Inc. (NYSEVZ) has been very aggressive in building out its industry-leading 4G LTE network, and AT&T Inc. (NYSE:T) has been trying to keep up. However, both companies also realize hat the amount of wireless spectrum available has been shrinking rapidly. Both companies have attempted to grab more spectrum anywhere they can find it. And that is the underlying reason behind the deal that Verizon will likely get approved by the FTC soon, and the reason behind the deal that AT&T had taken away by the U.S. Department of Justice.

Verizon Communications Inc. (NYSE:VZ)It's all about spectrum. AT&T Inc. (NYSE:T) initiated its attempt to conquer more spectrum space when it tried to purchase T-Mobile USA. The motives were true - it just wanted to have more spectrum space so it could expand out its new 4G network and reach more markets so it can compete with Verizon Communications Inc. (NYSE:VZ). The problem was the fact that AT&T tried to take out a direct competitor, and that lessened competition was what sent up red flags with the DOJ.

Verizon Communications Inc. (NYSE:VZ) had the same motive when it approached cable companies about a "marketing agreement," which is supposed to be approved by the FCC after the DOJ instituted some amendments to the agreement. The initial agreement would have shut out the other wireless carriers from having similar agreements with cable companies, which would have reduced competition - again, a DOJ red flag. However, because that could be worked out fairly easily and this wasnt' a purchase attempt by Verizon, Verizon is winning the race for more spectrum - at least at this point.

How this race will turn out is anyone's guess, but those who are behind are at a disadvantage against Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T), which hold 70 percent of the wireless market combined. This is not unnoticed by wily investors in both companies, including hedge-fund managers like D.E. Shaw, who has $85 million invested in AT&T as of the end of June, and Ray Dalio, who has $19 million in Verizon stock in his Bridgewater Associates hedge fund.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 30 percentage points in 13 months Learn how!

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!