AT&T just settled the Wall Street debate over the value of high bandwidth airwave rights suitable for super-fast next generation wireless networks.
Shares of tiny wireless startup Straight Path Communications, which owns a boatload of airwave rights in the 39 GHz and 28 GHz bands, have bounced around from $15 to $50 over the past year and closed at $36.48 on Friday. On Monday, AT&T announced an all-stock deal to acquire Straight Path for $95.63 per share.
That's great news for Straight Path shareholders and a potential disaster for investors that bet against the company by selling the shares short. It's also a huge win for the Federal Communications Commission, which settled an investigation into Straight Path in January with an agreement to receive 20% of the proceeds of the sales of its licenses.
That puts the agency in line to collect over $300 million of the total deal, which AT&T valued at $1.6 billion including the shares it plans to exchange for Straight Path's shares. AT&T is paying "a fair price for the spectrum that we're acquiring," a spokesman said, noting the airwave rights cover major cities such as New York, Los Angeles, San Francisco and Atlanta.
The deal will give AT&T a major boost in its effort to build 5G wireless networks using high bandwidth airwaves, as Straight Path (STRP, -0.33%) owns spectrum licenses covering the entire country in the 39 GHz band and additional licenses for the 28 GHz band. Known as the millimeter bands, the higher frequencies are capable of carrying far more data than lower bands like 700 MHz currently used in 4G networks, but have trouble traveling as far and penetrating obstacles. AT&T has already announced plans to conduct a variety of trials this year using the higher frequencies.