Straight Path shares skyrocket 22% as bidding war heats up

Shares of Straight Path shot up more than 22% this morning, increasing speculation about a bidding war for the company between Verizon and AT&T.

AT&T earlier this month announced plans to acquire Straight Path Communications in a deal aimed at bulking up its portfolio of millimeter-wave spectrum. But reports surfaced last week indicating a major telecom player—said to be Verizon—had outbid AT&T, agreeing to pony up $1.8 billion.

AT&T said last Monday that it would reconsider its offer in the coming days and may decide to up its bid. AT&T had five business days to respond, executives said.

Straight Path hasn’t identified the second bidder, but the company said this morning that it had received a revised offer “from a multi-national telecommunications company” for $135.96 per share, or $2.3 billion. Straight Path said AT&T now has three business days to match or exceed that offer.

“Under the AT&T Merger Agreement, Straight Path is required to pay a $38 million termination fee to AT&T if the Straight Path Board terminates the AT&T Merger Agreement in order to enter into an agreement with the Bidder,” Straight Path said. “The Bidder has agreed to pay the termination fee to AT&T on Straight Path’s behalf in such event.”

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

Straight Path agreed to pay two civil penalties and surrender about 20% of its 5G licenses to the FCC. For the $100 million civil penalty, Straight Path will pay $15 million upfront with $85 million suspended unless Straight Path sells all its remaining licenses or surrenders them to the FCC within 12 months. Also, 20% of any sale proceeds must be paid to the Treasury as an additional civil penalty.

Post-settlement, Straight Path holds an average of 620 MHz in the top 30 U.S. markets and covers the entire nation with 39 GHz spectrum, and it has retained all its 28 GHz spectrum licenses. Straight Path had long been expected to sell its licenses to a wireless or cable network operator.

The bidding war underscores the ever-increasing value of millimeter-wave spectrum as mobile network operators plot their strategies in advance of the launch of 5G offerings. Although higher-band airwaves have historically proved difficult to use to provide wireless services, they do promise to allow carriers to provide much higher speeds and far greater capacity, albeit in smaller coverage areas.

Indeed, high-band airwaves appear to be much more highly prized lately than low-band spectrum, particularly among the nation’s two largest carriers. AT&T committed to spend only $910 million in the FCC’s incentive auction of 600 MHz spectrum, for instance, and Verizon opted to spend nothing despite qualifying for the event.