11 companies were interested in buying Straight Path, Deutsche Bank says

Eleven companies were interested in acquiring Straight Path before Verizon finally won an explosive bidding war for the company last month, according to Deutsche Bank.

Straight Path announced a few weeks ago that it had inked “a definitive merger agreement” that will see the nation’s top wireless service provider pay roughly $3.1 billion in an all-stock transaction, ending an aggressive bidding war with AT&T for the company’s airwaves. Verizon will also fork over a termination fee of $38 million to AT&T.

AT&T had previously revealed an agreement to acquire Straight Path in a deal aimed at bulking up its portfolio of millimeter-wave spectrum. But the nation’s two largest wireless network operators weren’t the only potential bidders, Deutsche Bank’s Matthew Niknam said in a research note to investors this week.

“One of the most interesting findings from the Verizon/Straight Path S-4 filing was that 11/20 potential bidders contacted by Straight Path’s bankers expressed some level of interest, executing confidentiality agreements,” Niknam wrote. “These may have included non-strategic players (i.e.: financial sponsors), and Verizon/AT&T ultimately did drive the lion’s share of the bidding; however, we still think it is a point worth flagging. Specifically, we are increasingly hearing industry participants discuss the potential for non-wireless incumbents (i.e.: cable, larger tech companies) evaluating a greater presence in the U.S. wireless market.”

Indeed, Straight Path had long been expected to sell its licenses to a wireless or cable network operator. The company holds an average of 620 MHz in the top 30 U.S. markets and covers the entire nation with 39 GHz spectrum; it also holds 28 GHz spectrum licenses.

Straight Path reached a $100 million settlement with the FCC earlier this year, ending an investigation into the company’s failure to deploy wireless services as required under FCC spectrum licensing rules.

Verizon surprised analysts earlier this year when it sat out of the FCC’s incentive auction of 600 MHz spectrum despite qualifying to bid in the event. But the Straight Path deal illustrates how much the value of millimeter-wave airwaves has increased as carriers begin to prioritize increased capacity in advance of 5G services—even if that higher-band spectrum doesn’t propagate as well as lower frequencies.

Indeed, the sheer number of parties interested in Straight Path illustrates the fact that some cable companies and other players see 5G as a way to elbow their way into a crowded wireless market. But the aggressive bidding between Verizon and AT&T also indicates the two biggest wireless carriers view 5G as an opportunity to expand their businesses in a market where smartphone growth has largely stalled.

“Despite their existing size and scale, both Verizon and AT&T have been losing postpaid phone share to Sprint and T-Mobile in recent periods,” Niknam wrote. “As such, we think the Bells view 5G as the next frontier for wireless growth, and an opportunity for them to reassert technological leadership via a first-mover advantage (all four carriers have broad LTE coverage and the same handsets today). … It is telling that both Verizon and AT&T largely sat out of the 600 MHz auction, opting instead to competitively bid for 5G spectrum; we think both companies saw a speed to market advantage in moving sooner, as we also do not believe the FCC’s 5G spectrum auction will occur until later this decade.”