Verizon (NYS: VZ) Wireless and Cricket provider Leap Wireless (NAS: LEAP) announced a significant exchange of spectrum that, if approved by the FCC, will allow Leap to launch LTE service in Chicago and will allow Verizon to bolster its CDMA EV-DO and LTE networks in locations across the country.
The companies filed the spectrum exchange proposal with the FCC last week, arguing the agency should approve the transaction since the spectrum licenses in the transaction mostly haven't been built out and cover a relatively small percentage of the population. The licenses to be acquired by Verizon Wireless cover approximately 18.7 million POPs; the Chicago license to be acquired by Leap covers around 11 million POPs. Such spectrum swaps are relatively common among the nation's wireless carriers, though they can be worth hundreds of millions of dollars.
In the exchange, Leap is to get a 12 MHz 700 MHz A Block license covering Chicago that Verizon paid $152 million for during the FCC's 700 MHz auction in 2008. Leap said it currently owns 10 MHz of spectrum in Chicago and will use the additional spectrum to launch LTE service in the Windy City. Verizon currently offers LTE service in Chicago using its 700 MHz C Block spectrum.
"With carriers worldwide upgrading to faster and more efficient LTE technology, Cricket's deployment of this technology is critical to its ability to deliver competitive services to customers in the coming years," Leap wrote in its FCC filing for the swap.
Leap has said it plans to launch an LTE trial market in Tucson, Ariz., later this year, and will cover a total of 25 million people with LTE by the end of 2012, but it hasn't provided any additional details, including which markets will be built out.
Verizon, meanwhile, will acquire from Leap 23 PCS licenses and 13 AWS-1 licenses covering locations across the country, as well as a handful of other licenses. Verizon said it will use the spectrum to bolster its CDMA EV-DO and LTE networks. Verizon offers EV-DO service over its PCS spectrum across the country and has said it will launch LTE service on its AWS licenses (as a way to supplement its current deployment of LTE on its nationwide 700 MHz spectrum).
Interestingly, in its FCC filing, Verizon said the transaction is necessary for the carrier to continue meeting customer demands for mobile data -- a notable argument considering the enormous swaths of spectrum already owned by the carrier.
"While Verizon Wireless has consistently looked for ways to use spectrum in the most efficient manner, it has already obtained most if not all of the benefits achievable from more efficient use. ... While cell splitting can in some instances help meet increased demand, the benefits of that technology are limited because of the restricted ability to deploy additional towers and cell sites, and substantial costs of deploying additional sites. In short, techniques to enhance the efficient use of the spectrum will not be sufficient alone to meet the accelerating demand for more network capacity," the carrier wrote in its FCC filing. "Verizon Wireless' proposed acquisition of spectrum in the above-listed markets is therefore necessary to supplement the spectrum on which Verizon Wireless currently offers LTE and EV-DO technology to its subscribers."
The financial details of the transaction are unclear. "If both transactions close concurrently, Cricket will make a monetary payment to Verizon Wireless," Leap wrote in the filing. Representatives from both carriers declined to provide details.
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