- This is the 800 MHz spectrum that Dish Network/EchoStar wanted to buy several years ago but didn’t have the finances for it
- Grain Management plans to use the spectrum to serve utilities across the country
- In exchange, T-Mobile is getting 600 MHz licenses from Grain
It’s been a long time coming, but T-Mobile has found a buyer for the 800 MHz spectrum it inherited from Sprint. Private equity firm Grain Management plans to buy the spectrum and use it to serve the utilities industry, which has been clamoring for more spectrum to meet their critical infrastructure needs.
As part of the transaction, T-Mobile will receive a combination of cash and all of Grain’s 600 MHz spectrum licenses, which T-Mobile already has been using under a loan agreement. In partnership with Black & Veatch, Grain will market the 800 MHz spectrum portfolio to utilities, rural and regional operators and other enterprises.
“We are very pleased with the terms we reached with Grain and think the deal represents a great value for both parties,” said Dirk Mosa, SVP for Spectrum, Partnerships and Acquisitions for T-Mobile, in a statement.
Background on the 800 MHz sale
Dish Network, aka EchoStar, had first dibs on the 800 MHz spectrum as part of the U.S. government’s approval of the T-Mobile/Sprint merger but couldn’t come up with the finances to seal a deal. T-Mobile was then obligated to hold an auction for the spectrum with a floor price of about $3.59 billion.
Several parties expressed interest in the spectrum, but T-Mobile didn’t receive any qualifying bids. However, after the auction concluded, T-Mobile and Grain continued to negotiate, which culminated in a filing that’s now before the Federal Communications Commission (FCC).
The terms of T-Mobile’s deal with Grain weren’t disclosed. However, New Street Research analyst Philip Burnett in a report for investors said that assuming Grain’s 600 MHz spectrum is worth $700 million and T-Mobile’s 800 MHz is still worth $3.59 billion, “we doubt that T-Mobile would be willing to accept a $2.9BN loss in this transaction. Instead, we assume there is some amount of cash in the transaction. We would assume the cash T-Mobile receives is ultimately put toward share repurchases.”
Essentially, T-Mobile is buying the 600 MHz licenses it had already leased from Grain as part of the consideration for the 800 MHz spectrum, said Terry Chevalier, managing director at Sunstone Associates.
“Ultimately, this is a very strategic deal for T-Mobile as not only do they get 600 MHz in some markets across the country, more importantly, they remove 14 MHz from the spectrum screen, which eases their ability to acquire more 600 MHz in other markets across the country. This could make their option to acquire Comcast’s 600 MHz more achievable,” Chevalier told Fierce.
In their public interest statement, the companies put forth how the best use of this spectrum is to serve utilities, and Grain already has made “significant headway” in developing a nationwide pipeline of utilities interested in acquiring or using the spectrum, with several utilities signing letters of intent.
“A uniform, well-propagating spectrum band available nationwide will offer substantial benefits for many utilities and their consumers, including cost efficiency, improved security, and interoperability between utility networks useful for a safe and effective national electricity grid,” the companies told the FCC.
One 800 MHz hiccup
There’s just one hiccup, Burnett noted, and it sounds like a rather big one. That is: 97% of the 800 MHz licenses expire in June 2028, which isn’t enough time for Grain to accomplish what it intends. Therefore, Grain is asking for a 12-year extension on the buildout from the time the transaction with T-Mobile is consummated.
That sounds like a long time to build out a network – EchoStar only had a few years to build its 5G network – but the filing points out that it’s consistent with the final buildout deadlines applicable to nearly all recently assigned “flexible-use bands,” such as AWS-3, 600 MHz, 900 MHz and 3.7 GHz.
The applicants say a 12-year timeframe is appropriate for myriad reasons, including providing enough time for network equipment vendors like Nokia, Fujitsu, and Ericsson to develop base station radios. They also need time for chipset manufacturers such as Qualcomm and GTC to update chipset roadmaps to support a 7x7 megahertz carrier in Band 26 and for OEM device manufacturers to build devices specific to the utility industry.
Grain needs time to hook up utilities
Chevalier points out another reason for the lengthy timeline. Most utilities need to secure the capital to deploy networks as part of a rate case they would file with their public utility commission.
“Rate cases extend for several years at a time,” he said. “Utilities need certainty that any spectrum they use would be fully available over that time (and the future). This means any lease-based model with utilities needs to lease the spectrum for a very extensive period of time.”
But is the market for utilities big enough? After all, Anterix is also going after this market with 900 MHz spectrum.
“If this is truly limited to utilities only, you’re trying to split the market with Anterix while also competing with CBRS-based private networks. More likely, if you think of this more broadly in the Industry 4.0 model and don’t limit yourself to utilities, the market will be much larger, though what specific use cases is a bit uncertain,” he said.
For its part, Grain argues that the 800 MHz will complement, rather than compete with, the 900 MHz offerings from the likes of Anterix. It also makes the point of saying that it’s also working with rural and regional carriers, as well as other wireless enterprises, that need spectrum beyond what’s available through other low-band alternatives.
The deal, subject to regulatory approvals, is expected to be finalized by the end of April 2025, with closure expected at a later, unspecified, date.