Partners Predict 'Bidding War' For Straight Path As Unnamed Company Tops AT&T's $1.6B Offer
A new suitor for Straight Path Communications has thrown its hat in the ring, topping AT&T's bid by $200 million on Tuesday morning.
As carriers double down on their 5G development plans, solution providers are expecting an all-out bidding war for Straight Path, which owns valuable millimeter wave (mmWave) spectrum licenses that cover the entire United States, including the top 40 markets.
"The race is on," said Max Silber, vice president of mobility for MetTel, a New York City-based solution provider, and AT&T partner. "The more wireless spectrum you have, the more high-end, up-and-coming services you can deploy."
[Related: Partners Cheer AT&T's Deal For Straight Path As Telecom Giant Pushes Toward 5G]
The unnamed bidder, which Straight Path referred to as a "multinational telecommunications company," entered a "superior" and unsolicited bid to acquire Straight Path for $104.64 per share in an all-stock deal worth $1.8B, according to the company. That's compared to AT&T's offer of $1.6 billion, or $95.63 per share.
News of the second bidder sent Straight Path Communications' stock soaring up nearly 13 percent to $124.74 a share, well above even the second bid, by Tuesday afternoon.
Straight Path, based in Glen Allen, Va., would owe AT&T a termination fee of $38 million should they take the new bidder's offer. However, the new bidder has agreed to pay that fee on Straight Path's behalf. This demonstrates how important mmWave spectrum is to carriers right now, Silber said.
Millimeter wave spectrum allows carriers to deploy high-bandwidth mobile data services in a concentrated service area. Having access to a high-speed, high quality network will also let service providers deliver new IoT services, Silber said.
For partners, having access to a high-speed network that can deliver and support emerging IoT services is a big benefit, said Rickie Richey, CEO of Fairhope, Ala.-based Altaworx, an AT&T and Verizon partner that focuses on wireless solutions.
"You need more spectrum because you can't cover as much ground with 5G … this technology could really make a difference in how we can deliver services to our larger customers," Richey said.
There are not many companies left that buy and hold spectrum licenses, and Straight Path owns a large share of this highly sought-after wireless spectrum.
"[Carriers] are all trying to buy up as much spectrum as they can – it's a big race," Richey added.
Reuters reported earlier this month that Verizon was the second bidder for Straight Path. Both AT&T and Verizon are hungry for more spectrum, and whichever companies are involved in the bidding war for Straight Path, neither are likely to give up easily, said Rob Chamberlin, co-founder and chief revenue officer of DataXoom, a Walnut Creek, Calif.-based solution provider and wireless carrier partner.
"The fact that this bidding war is going on and this asset being highly valued is evidence that both companies have the intention of being the best 5G provider out there. That's the future of mobility, and that's very relevant to the channel," Chamberlin said.
Under the terms of Verizon's XO acquisition that closed in February, the Basking Ridge, N.J.-based carrier gained wireless spectrum in addition to XO's fiber-optic network business. The deal gave Verizon 102 Local Multipoint Distribution Service (LMDS) spectrum licenses in the 28 GHz and 39 GHz bands, which the carrier said it could use for 5G testing.
AT&T, for its part, acquired FiberTower in January, a privately held provider of spectrum and fixed wireless services. The Dallas-based carrier said that FiberTower's spectrum in the 24 GHz and 39 GHz bands added to its holdings of mmWave spectrum that can be used for 5G.
"I think you see the level of importance of this deal just based on how much more [the second bidder] is willing to pay, compared to Straight Path's stock price," MetTel's Silber said. "I think there will be some back and forth, and I don't see AT&T walking away so quickly."