AT&T Takes Worthy Gamble On Straight Path Buyout

AT&T announced its plans to buy Straight Path Communications, a company which holds wireless spectrum licenses, in a $1.25 billion, all stock acquisition deal. The goal, of course, is to continue accumulating the airwaves the telecom needs to build a bigger, next-generation network.

This deal is a fine demonstration of the way wireless carriers can be more apt to pay higher prices for assets they view as essential for 5G networks. And 5G networks, are the next wave of communications technology, expected to not only be much faster but also allow for higher capacity data transmission.

To clarify the sale, AT&T released a statement saying: “This acquisition will support AT&T’s leadership in 5G, which will accelerate the delivery of new experiences for consumers and businesses like virtual and augmented reality, telemedicine, autonomous cars, smart cities, and more.”

More specifically, the tech company pointed to beaming its DirecTV Now customers their programs over a fixed 5G connection.

Straight Path is among the largest holders of 28 GHz and 39 GHz millimeter wave spectrum used in mobile communications. This is important, of course, because industry analysts say that millimeter wave spectrum will probably play a very large role in the 5G network boom.

The sale of Straight Path to AT&T will be worth $95.63 per share and has been designed to be a tax-free reorganization. This is a premium of 204 percent over Straight Path’s closing price on January 11—a price of $31.41—just one day before the company had entered into a settlement with the FCC. It also represents a 162 percent premium over its closing price from Friday: $36.48.

As one would hope, Straight Path majority owner Howard Jonas supports this deal with AT&T. He has even agreed to vote his Class A shares—held through a trust—in order to support the completion of this transaction.

At the end of the day, though—and as is the case with so many of these deals—the parties have to wait for regulatory approval from the Federal Communications Commission. When you consider the FCC’s somewhat recent adoption of a more stern stance on net neutrality, this approval should not be too big a deal at all.

While this is certainly good news for AT&T and Straight Path investors, it looks like talk of other similar deals has helped boost companies all over the industry: Sprint rose 1.5 percent to $8.49; Dish Network rose 2.3 percent to $64.01

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