Verizon Wireless buying spectrum and assets from Cincinnati Bell for $210 million

Verizon Wireless buying spectrum and assets from Cincinnati Bell for $210 million
By Derek Kessler on 7 Apr 2014 09:07 am EDT
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Cincinnati Bell Wireless has entered into an agreement to sell its spectrum holdings and wireless infrastructure to Verizon Wireless. The deal, valued at $210 million will see Cincinnati Bell's customers transferred to Verizon "or other wireless providers" over the next 8-12 months, during which time the carrier will lease back that spectrum and those towers for "a nominal fee".

With 340,000 subscribers, Cincinnati Bell is the 9th largest carrier overall in the United States, and the fourth largest regional carrier in the nation. After the wind-down of their cellular service, Cincinnati Bell will be left to focus on their FiOptics fiber internet and television service.

While Cincinnati Bell does have a loyal customer base in the Ohio-Kentucky-Indiana region around Cincinnati, they've struggled to compete against the national wireless behemoths. Citing the costs that if would take to upgrade their network, Cincinnati Bell opted to not upgrade their network to support LTE, instead focusing on improving their HSPA+ network, which has consistently offered better speeds in their coverage area than LTE from competitors, but struggled with roaming once users left the Cincinnati metro area.

Verizon has spent considerably recently in efforts to bolster their network. In addition to the purchase of Cincinnati Bell's wireless assets for $210 million, last year Verizon put down $130 billion to buy out Vodafone's 45% stake in Verizon Wireless and $3.6 billion to buy spectrum across the nation from cable providers Comcast, Time Warner, Cox, and Bright House.

Verizon runs a CDMA+LTE network, while Cincinnati Bell's network is purely GSM-based.

It's become increasingly difficult for regional carriers to compete effectively with the giants of AT&T, Sprint, T-Mobile, and Verizon. Does the capitulation of a regional power like Cincinnati Bell spell the coming end of regional carriers in the United States?

Press release:

Cincinnati Bell to Sell Wireless Spectrum Licenses

CINCINNATI--(BUSINESS WIRE)--Apr. 7, 2014-- Cincinnati Bell (NYSE:CBB), a leader in telecommunications and broadband networking services, today announced that it has entered into agreements to sell its wireless spectrum licenses and certain related assets to Verizon Wireless for cash and an assumption of certain Cincinnati Bell liabilities with a total value to Cincinnati Bell of approximately $210 million.

“We appreciate the loyal support from our Cincinnati Bell Wireless customers over the last sixteen years, and we remain committed to providing them with wireless service and support throughout the transition period,” said Ted Torbeck, President and CEO of Cincinnati Bell, adding that it is not necessary for customers to take any action at this time.

Cincinnati Bell Wireless (“CBW”) will, for a nominal charge, lease back the spectrum it is selling for a period of time following the closing of the purchase transaction, during which it will wind down its wireless network operations and assist its wireless customers in transitioning their service arrangements to Verizon Wireless or other wireless providers. CBW will notify its customers with further details regarding this transition assistance around the time of the closing, which is expected to be in the second half of 2014.

Transaction Detail

CBW has agreed to sell to Verizon Wireless all of its right, title and interest in its wireless spectrum licenses for cash consideration of $194 million. In addition, Verizon Wireless will assume certain tower lease obligations. CBW expects to continue to provide wireless service for 8-12 months from the time of signing. The cash flows from these ongoing operations are expected to largely offset the anticipated one-time fees associated with winding down the business. The total value of the deal is estimated to be 4.5 and 6.0 times 2014 and 2015 CBW Adjusted EBITDA consensus wireless estimates respectively.

Concurrently, Verizon Wireless has entered into a separate agreement to assign its rights to acquire the spectrum licenses being sold by Cincinnati Bell to Grain Management, LLC, a private equity firm that invests in the media and telecommunications sectors. Verizon Wireless will then lease certain of the spectrum licenses from Grain Management. The Cincinnati Bell tower lease arrangements to be assumed by Verizon Wireless are not included in its agreement with Grain Management.

Cincinnati Bell anticipates that, as a result of the transaction, it will absorb certain overhead and shared service costs currently attributable to its wireless operations. Cincinnati Bell is currently in the process of developing strategies to minimize these costs and will provide additional detail prior to or shortly after the transaction closes.

“This transaction is an important step toward increasing focus on our growing strategic product base,” commented Torbeck. “It has become economically challenging for us to invest in our wireless business at the levels necessary to deliver best-in-class service to our customers. This transaction not only ensures that our customers have access to top-tier wireless service, but it also gives us increased flexibility to meet their growing demand for our Fioptics suite of products.”

The purchase transaction is subject to customary closing conditions, including regulatory approval by the Federal Communications Commission. Stephens Inc. is acting as sole financial advisor to Cincinnati Bell. Cravath, Swaine & Moore LLP is acting as legal counsel, and Bingham McCutchen LLP is acting as regulatory counsel to Cincinnati Bell in this transaction.

Source: Cincinnati Bell

22 comments

Drmoe

They just get bigger and bigger...

Posted using the best phone ever, the Z30!

koalaberry

The opposite of capitalism.

Drmoe

Yup and I'm sure the rates will eventually rise too...

Posted using the best phone ever, the Z30!

550WHAT

By the way, Verizon is eventually changing their network from CDMA to GSM, so acquisitions of GSM based carriers for what ever other reason is just for what ever...

Munich669

Big Red getting bigger.

Posted via CB10

David Tyler

> Verizon runs a CDMA+LTE network, while Cincinnati Bell's network is purely GSM-based.

Do the Cincinnati Bell folks have to go out and get new phones..?

Posted via CB10

medic22003

I'm sure they will. Verizon should give them one if they choose to go to them. I'm sure there are a lot of mad people right now. I know when us cellular did the same thing selling pieces to sprint people were not happy.

Posted via CB10

scalemaster34

Most likely Verizon will keep the existing operations going for a while. All upgrades will be to Verizon system. And Verizon will probably provide some incentive for early upgrades.....

But I agree that Big Red is getting bigger and bigger, and they don't really seem to care what the competition is doing. You PAY for the exceptional coverage (at least my area) that they provide.

jberb1984

Anyone know what this means for the customers? I've got three phone lines and fi optics with cincinnati bell. I'm curious how my rates will change. Will I have to switch to a Verizon plan? Will I have to sign a new contract? What's the best deal available?

Posted via CB10

peter0328

Hi I meant to reply to you read my comment below :)

Posted via CB10

vbittersweet

I'm also a Cincinnati Bell customer and can tell you what our corporate CBW rep told me yesterday. The FCC will approve the sale over the next 4-5 months with CBW services being completely discontinued by February 2015. Our users, who pay via payroll deduction, can opt to get their CBW phones unlocked by the provider for free but those phones will not function on the Verizon network. Your unlocked phones could be transferred over to any other GSM network if you choose (AT&T, T-Mobile, etc.). I'm not sure how all of that will change your bundle pricing, since I only received corporate account info.

peter0328

Most likely you will either be transitioned to Verizon with your current pricing or they will end your contract and you will be able to choose your carrier.

I'm going to guess they will do the second. This is not a purchase for subscribers (it's less than 1 million).

Verizon is making this purchase for the AWS spectrum. They are gaining around 40mhz of it through this purchase for this market.

Verizon is also gaining towers for this market. This will allow them to rapidly shutdown CBW equipment and redeploy the AWS for use with their LTE network.

I don't think Verizon cares about a device transition. IMO it's more trouble than its worth for them. If they just end your contract most CBW customers will end up signing a contract with Verizon anyway since they will have the best coverage in your market after the purchase. And since it will be a new contract they won't need to grandfather your old plan (like they did with Alltel).

Hope this helps anyone looking for more info. None of the news outlets are stating what this actually means, they are just restating the press release.

Posted via CB10

bob_tn

I wish this would help with coverage in other parts of Kentucky.
Staying close to main highways isn't bad. But rural areas is still up and down.

Posted via CB10

rthonpm

With the size of the US, regional carriers are going to be all but extinct. The roaming agreements have to cut into their costs more than a major carrier and with no real clout they're often saddled with older model phones. Before long it will be two major players (Verizon and AT&T), two moderate ones (T-Mobile and Sprint) and a lot of MVNO carriers. If that's the route we'll have in the US then the FCC needs to break some of the stranglehold the carriers have in terms of updates and device locking.

Posted via CB10

Rello

It was going to happen eventually. As someone who just left a Cincinnati Bell, it's was easy to see that they couldn't compete with the major giants. Their 3G had decent speeds but it was frustrating that we still didn't have LTE. I didn't have too many problems with them but I switched to Tmobile and pay much less than I did with Cincinnati Bell so I'm happy

Posted via CB10

raino

It's not very often that we get a local perspective. How were their 3G/HSPA+ speeds? Better than what TMO had before they recently activated their LTE network in Cincinnati?

I'll remember Cincinnati Bell quite fondly, as it was the second biggest AWS UMTS carrier in the US, and the answer to many threads asking "where can I buy phone X that will work on TMO?"

cog921

Long time CinBell customer here. One reason I really liked them is the coverage they provided. When traveling to visit family in WV they ha e been the only carrier that we maintained coverage. VZ services basically stop when you pass Charleston, WV and the phones kill the batteries trying to locate a signal. Will be looking at T-Mobile To see if my family can maintain the same service for the same or better price.

Posted via CB10

bunky1971

What is really interesting is the fact that Cincinnati Bell and T-Mobile utilized that 1700mhz frequency for hspa/+

Posted via CB10

Schmurf

Interesting how in Canada we gripe about only having three main national carriers with another 1-2 smaller national carriers, yet the US, with a market that is arguably 10 times our size has only four major carriers. I think there is proportionately less choice in the US.

Posted via CB10

Douken

Cincinnati bell is already expensive

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Kenny Pruitt

What about the people that have I wireless.. (pre paid phone service) ????