T-Mobile forks over $3.5B for more 600 MHz spectrum

T-Mobile informed the SEC that it is buying additional 600 MHz spectrum from Channel 51 License Co. and LB License Co. for a total cost of $3.5 billion.

About $1.9 billion will be paid to 51 License, and about $1.6 billion will be paid to LB License.

The geographic areas covered by the licenses include markets in San Francisco, Atlanta, Chicago, Los Angeles, Boston, Tampa, Columbus, Minneapolis, Seattle, Philadelphia, Baltimore, Washington, D.C., Dallas, Phoenix, Houston, Salt Lake City, St. Louis and New Orleans.

The licenses range from 10 MHz to 30 MHz per market and cover over 108 million POPs, or about one third of the U.S. population. 

The licenses are already being used by T-Mobile through exclusive leasing arrangements with the sellers. These leasing arrangements were entered into in 2020 during the early days of the Covid 19 crisis when the big wireless carriers borrowed spectrum temporarily to increase their capacity.

But after a few months of borrowing, T-Mobile entered into a three-year arrangement with LB License and Channel 51 — companies controlled by the venture capital firm Columbia Capital — for 600 MHz paid leasing arrangements.

Now, T-Mobile wants to own that spectrum permanently.

Speaking at an Oppenheimer investor conference this morning, T-Mobile CFO Peter Osvaldik said the leases cover about 45% of the company's postpaid base. "We’re very differentiated from a 5G perspective, and the low-band layer definitely creates a portion of that," said Osvaldik. "We’re the only ones with a low-band 5G dedicated network. The competition us doing more DSS. Also we’re doing a lot of carrier agg with the mid band layer to enhance the coverage, so that’s another strategic advantage of using 600 in that space as well."

In terms of paying the $3.5 billion for the new spectrum, Osvaldik said that won't happen until probably mid- to late-2023.

Spectrum boom days

T-Mobile is having a big month for spectrum purchases. It is currently in the midst of Auction 108, bidding for 2.5 GHz spectrum to fill in the gaps of its nationwide coverage in that band.

The analysts at New Street Research, led by Jonathan Chaplin, wrote today, “Just last night, we lowered our estimate for what T-Mobile would spend in the 2.5 GHz auction from $3.4 billion to $0.8 billion. We will be adding those savings back, plus a little more, for this transaction [600 MHz]. We now expect T-Mobile to spend up to $4.25 billion on spectrum in 2022.”

According to their analysis T-Mobile is buying the 600 MHz spectrum from Columbia for a price of $2.64 per MHz/POP. But there are some unknowns related to how much Columbia originally paid for the spectrum, so the premium that T-Mobile is paying is also unknown.

Osvaldik declined to specify the premium T-Mobile is paying.


T-Mobile has also been leasing 600 MHz spectrum from Dish since the early days of Covid. According to the analysts at New Street, T-Mobile is leasing slightly more spectrum from Dish (than from Columbia) at an annual rate of $56 million.

“The sale is a positive sign for spectrum values and for Dish in particular,” wrote New Street. “The value of 600 MHz has more than doubled over five years. This would suggest that Dish’s 600 MHz holding will have more than doubled from $6 billion to almost $15 billion (assuming a price of $2.64 per MHz/POP). In an environment where investors are worried about Dish’s ability to raise capital against spectrum assets, a mark on value like this is very helpful.”