By Nicola Leske
NEW YORK (Reuters) - Verizon Wireless and Deutsche Telekom's U.S. unit have agreed to a spectrum deal that may clear the way for the U.S. company's plans to buy a chunk of spectrum from cable providers.
The agreement, which needs approval by the Federal Communications Commission (FCC) and the Department of Justice, included exchanges of spectrum between the two carriers and a cash payment from T-Mobile USA, the companies said on Monday.
They declined to divulge financials of the deal but analysts estimated that T-Mobile USA would pay around $260 million.
In addition, T-Mobile USA said it had given up its opposition to Verizon Wireless' proposal to buy spectrum from cable companies.
A T-Mobile USA spokeswoman said that "our agreement with Verizon will alleviate the public interest harms of their transaction with the cable companies as originally proposed", adding that "with FCC approval of these divestitures, we now support prompt approval of Verizon's transaction along with our transaction".
Verizon Wireless had said in April that it plans to put a chunk of wireless spectrum up for sale, potentially improving its chances of gaining regulatory approval to buy about $3.9 billion worth of wireless airwaves from cable companies including Comcast Corp and Time Warner Cable Inc.
The spectrum buy would be part of broader agreements to create a joint venture and allow the cable operators to resell Verizon's mobile service.
That plan was opposed by several smaller rivals -- among them T-Mobile USA -- who had complained to the FCC about the bigger company's cable deal on concerns that it would give too much market power to the already dominant company.
Some analysts suggested that Verizon had reached out to T-Mobile USA to clear the way for FCC approval.
"T-Mobile was the most vocal SpectrumCo deal opponent remaining and we think Verizon was either proactive in reaching an agreement with T-Mobile or encouraged to do so," Macquarie Equities research said in a note, adding that "either way, this is likely a win-win for both companies".
T-Mobile USA, the No. 4 U.S. carrier, has been scrambling to improve its business and stem customer losses, exacerbated by a nine-month period in 2011 when it was focused on seeking approval for a proposed $39 billion takeover by AT&T which collapsed in December.
The deal would improve its position in some parts of the United States because it will receive spectrum covering 60 million people in exchange for spectrum given to Verizon Wireless covering 22 million people
"As a result of this transaction, T-Mobile USA will gain AWS (Advanced Wireless Services) spectrum in many regions of the Northeast where it has historically had a weak portfolio, and give up small portions of spectrum in California where it has ample spectrum holdings," Bernstein analyst Robin Bienenstock said.
Consumer advocacy group Public Knowledge said the agreement between T-Mobile USA and Verizon proved that Verizon Wireless' cable spectrum -plans would not be beneficial for consumers.
"That Verizon Wireless feels the need to buy off T-Mobile to close its spectrum/marketing deals with the country's largest cable operators underscores just how bad this deal really is for American consumers and competition generally," said Harold Feld, legal director at Public Knowledge.
"As Public Knowledge has consistently pointed out, the true danger lies not only in the concentration of spectrum in the hands of the leading wireless provider, but with the cozy, cartel-like arrangements between Verizon, Comcast, and the other MSOs (Multi System Operators) party to the deal," he added.
(Additional reporting by Harro ten Wolde in Frankfurt and Jasmin Melvin in Washington.; Editing by Dan Lalor and Alden Bentley)