Verizon’s Acquisition of Cincinnati Bell’s Spectrum and Assets Will Result in the Termination of Cell Site Leases

Today, April 7, 2014, Verizon announced that it has finalized a deal with Cincinnati Bell wherein it will purchase all of Cincinnati Bell’s cellular assets and spectrum licenses for $210 million. Cincinnati Bell has stated that it intends to shut down its wireless network within the next 8-12 months, and in the interim it will transition its existing GSM customers to Verizon Wireless’s CDMA network – or other carriers.

Cincinnati Bell owns 700MHz, AWS and PCS spectrum in southeastern Indiana, southwestern Ohio, and northwestern Kentucky. As of the end of 2013, Cincinnati Bell served approximately 340,000 wireless subscribers. We suspect that Cincinnati Bell was finding it difficult to compete with AT&T, Sprint, T-Mobile, and Verizon due to its limited service area, higher costs for devices and equipment, and inability to competitively deploy LTE. Neither Cincinnati Bell nor Verizon Wireless has stated when their deal is expected to close, but like all spectrum transfers, it will be subject to regulatory approval.

What to expect if you have an existing lease with Cincinnati Bell

Since Cincinnati Bell’s GSM network is not compatible with Verizon Wireless’ CDMA/ LTE network, it is unlikely that Cincinnati Bell leases will continue for more than a year. They may in, fact, be terminated earlier than that.

If you are a building owner or a tower owner with a Cincinnati Bell tenant lease, chances are that the lease will be terminated in 2015. If you are a landowner party to a Cincinnati Bell ground lease, you are likely safe. This is because Cincinnati Bell already sold most of its towers to American Tower in 2009, at which time the average Cincinnati Bell tower had 2.1 tenants (including Cincinnati Bell). It is likely that American Tower will hold onto the majority of these towers, even after Cincinnati Bell terminates its leases with American Tower, because the towers are shared with other tenants. It’s also possible that new tenants will collocate on the space that Cincinnati Bell vacates. If you are in the process of selling or extending a cell tower ground lease wherein Cincinnati Bell is the original owner or a tenant on the tower, it is probable that your deal terms will be re-traded.

If you have any questions about the impact of the Cincinnati Bell/ Verizon acquisition, please don’t hesitate to reach out to us.