Verizon Communications Inc. has topped AT&T Inc.'s offer for Straight Path Communications Inc., according to a person familiar with the matter, sparking a bidding war over a tiny company that controls a swath of wireless airwaves thought to be at the forefront of next-generation networks.
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Verizon bid $1.8 billion for Straight Path, topping AT&T's stock bid of $1.6 billion earlier this month. AT&T, which has until next week to respond, said Tuesday it was evaluating the situation. Verizon declined to comment. Straight Path didn't immediately respond to a request for comment.
The competing offers show how wireless networks are changing. Both telecommunications companies surprised investors this month by largely sitting out a major government airwaves auction. The airwaves being sold were low-frequency, once considered "beachfront" property because they travel long distances and penetrate buildings -- perfect for wireless carriers that want to cover large areas.
But consumers are now more likely to watch videos than talk on their smartphones. As a result, carriers must focus on expanding network capacity in targeted areas of high demand.
The airwaves controlled by Straight Path are in ultrahigh frequencies that were once considered all but useless for wireless carriers. These frequencies don't travel far or penetrate walls -- they are so sensitive, in fact, that they can be influenced by rain and falling leaves.
But the frequencies are thought to be necessary for fifth-generation networks. They aren't yet commercially available, though Verizon and AT&T are racing to launch them in the coming years. The two companies have already struck smaller deals to gain access to other high-frequency airwaves.
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These 5G networks require different types of network architecture: Instead of placing surfboard-sized antennas atop 200-foot towers, 5G antennas will be much smaller and hung from structures such as lampposts. Placing antennas closer to consumers, along with other technological developments, will mitigate the spectrum's shorter reach.
T-Mobile US Inc. Chief Executive John Legere said Monday that his company had also bid for Straight Path but considered AT&T's offer too expensive to match.
Straight Path was spun out of telecom provider IDT Corp. in July 2013. IDT paid $56 million in 2001 and 2002 for the airwaves licenses, buying them from another telecom, WinStar Communications, after it sought bankruptcy protection.
In January, the Federal Communications Commission fined Straight Path $100 million for failing to use its spectrum. The FCC also forced Straight Path to relinquish some of its airwaves, put itself up for sale and remit 20% of the sale proceeds to the Treasury Department as an additional penalty.
Reuters earlier reported that Verizon outbid AT&T for Straight Path.
--Drew FitzGerald contributed to this article.
(END) Dow Jones Newswires
April 25, 2017 15:17 ET (19:17 GMT)