To understand why Verizon just spent $3.1 billion to buy Straight Path Communications , it helps to think of a big plot of rural land. The property might be dusty and far from population centers, but it’s next to a planned casino, which is likely to get developed in the coming decade. That could bring infrastructure, commerce, and, of course, people.
Suddenly, your rural land is not so rural and it’s worth a lot more than you paid. In Verizon’s world, Straight Path is the underdeveloped “real estate” that could eventually be worth far more.
Straight Path holds a swath of spectrum, or airwaves, that could eventually be used in a 5G network. The high-frequency of this particular spectrum is well-suited for the faster broadband-like speeds that the industry hopes to achieve with 5G.
Verizon outbid AT&T for Straight Path because the spectrum is probably worth more to Verizon than anyone else. Verizon has doubled down on the wireless business even as AT&T has diversified its business by buying DirecTV and with its deal to Time Warner . The problem is wireless trends have been not been particularly strong lately. All the more reason for Verizon to think well into the future, even if it costs $3.1 billion.
Shares of Verizon were down 0.5% Thursday afternoon, to $46.17.
Big Picture: Verizon is spending $3.1 billion to help solidify its future plans in 5G wireless.
To understand why Verizon just spent $3.