Verizon Wireless Spends $3.6 Billion for More Spectrum (VZ, VOD, CMCSA, TWC, S)

It’s not everyday that a company gets access to another 259 million customers. But that happened today for Verizon Wireless, the joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone plc (NASDAQ: VOD). Verizon paid $3.6 billion for 122 Advanced Wireless Services spectrum licenses to SpectrumCo LLC, a joint venture of Comcast Corp. (NASDAQ: CMCSA), Time Warner Cable Inc. (NYSE: TWC), and privately held Bright House Networks. Sprint Nextel Corp. (NYSE: S) was originally part of SpectrumCo, but withdrew from the group in 2007. SpectrumCo paid about $2.4 billion for 137 licenses in October 2006.

But wait, there’s more:

The companies also announced that they have entered into several agreements, providing for the sale of various products and services. Through these agreements, the cable companies, on the one hand, and Verizon Wireless, on the other, will become agents to sell one another’s products and, over time, the cable companies will have the option of selling Verizon Wireless’ service on a wholesale basis. Additionally, the cable companies and Verizon Wireless have formed an innovation technology joint venture for the development of technology to better integrate wireline and wireless products and services.

The cross-selling agreements are a nice bonus for the cable operators, who now will be able to bundle wireless service with their existing phone, broadband, and cable TV services. The sale has the the added benefit of getting the cable guys out of the low-margin, high-cost wireless business.

For Verizon Wireless, the purchase gives them a larger population to cast their net over a larger population and an opportunity to bundle the cable operators’ services into a package of their own. But the added spectrum is what the deal’s all about for Verizon Wireless. The new capacity will be a significant aid to the build-out of the company’s 4G LTE network.

Comcast will realize about $2.3 billion from the sale and Time Warner Cable will get about $1.1 billion. That’s about double their investments in the original spectrum license purchases in 2006.