Spectrum Auction Raises Over $35 Billion

The FCC’s AWS-3 spectrum auction has surpassed presale estimates, so far earning more than $35 billion in Round 30. There is still bidding left to do too! However, according to Jonathan Chaplin at New Street Research as the auction progresses things are getting worse for the carriers. On Friday, the bidding closed at $2.10 /MHZ-POP for the paired spectrum netting the $34 billion. “The pace of bidding is slowing, but with bids on 260 licenses in the last round it looks like we have a way to go (auction closes when no new bids),” Chaplin explained in a research note. “Things are getting steadily better for the owners of capacity (DISH; GSAT; Sprint) and steadily worse for the carriers. We have assumed AT&T and Verizon will each acquire 10x10MHz and they will split the remaining 5x5MHz with T-Mobile (with each getting about 1/3). At current prices, AT&T and Verizon would spend $15BN each and T-Mobile would spend $2 billion. The auction price is clearly a blow for AT&T and Verizon. It is not as bad for T-Mobile because they are likely spending much less and because they have some excess capacity that just got revalued.” The $34 billion is more than three times the $10.5 billion reserve price that the commission put on the sale, the first offering of previously unavailable airwaves in six years, The New York Times reported. “There’s a lot going on here,” Stephan Sloan, Director at Media Services said. “Some markets have gone all 30 rounds, but some markets have only gone 19 rounds. I don’t have a feel if this will go another thirty rounds.” At the close of the auction yesterday, there were 137 new bids. The success of this auction, has people asking what this means for the FCC’s 2016 TV Spectrum Auction. “It would be a mistake to presume that there’s any reason to apply the outcome of this auction to the TV spectrum auction in 2014,” Sloan noted. “We don’t know all the rules, how much spectrum will be available and I am not sure that the band-plan is finalized yet. All these are important influences on values. Just look at how 2 participants, AT&T and Verizon floated this entire auction.”