AT&T Acquires Straight Path Communications in 5G Bet

On Monday, AT&T announced that it would acquire Straight Path Communications, a holder of wireless spectrum licenses for a price of $1.25 billion in a deal of all-stock as it looks to accumulate airwaves needed for a next generation network.

This deal is an example of how wireless carriers might be more willing to pay large prices for assets viewed as being critical to 5G that is expected to increase speeds and provide more capacity.

It is widely considered that the network will be an opportunity worth billions of dollars and that carriers do not have that many targets for acquisitions that could give them the spectrum needed in preparing for the 5G roll out.

Straight Path holds a large number of 28 GHz as well as 39 GHz millimeter spectrum used for mobile communications.

The second largest wireless carrier in the U.S. said it was offering $95.62 per share, which represented a 162% premium over the close of Straight Path stock on Friday. Shares of Straight Path rose in afternoon trading on Monday, while shares of AT&T were slightly lower on the day.

Millimeter wave spectrum has been expected to play a big role in the new 5G networks. AT&T as well as its rival Verizon Communications has been carrying out trials using 5G. Verizon has tested a fixed wireless 5G service with Ericsson in 11 U.S. markets and is expected to make a commercial launch sometime in 2018.

At the same time, AT&T earlier in the year said it successfully carried out tests with Nokia that had delivered DirecTV Now its video service over a connection that used 5G.

Earlier in 2017, AT&T announced it would acquire FiberTower a privately held business and its rights to millimeter wave spectrum. It is expecting that deal to close in January of 2018.

This past February, Verizon, the No. 1 wireless carrier in the U.S, said it closed on the acquisition of the fiber optic network of XO Communications for $1.8 billion, which gave it access to the millimeter wave spectrum.

Between Straight Path and FiberTower, AT&T will likely have a similar amount of the spectrum as does Verizon if not slightly more, said an analyst in California on Monday.

Telecom companies’ shares increased following the news as many investors expect a big wave of acquisitions and mergers across the sector during the year.

Dish Network Corp, which had amassed a large number of wireless spectrum licenses, increased 1.9% in Monday afternoon trading.

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