AWS-3 Re-auction Begins Today
UPDATE The FCC’s re-auction of Advanced Wireless Services (AWS) licenses, Auction 113, begins today. Up for bid are 200 licenses in the AWS-3 bands (1695– 1710 MHz, 1755–1780 MHz, and 2155–2180 MHz).
These licenses were originally sold in Auction 97 which concluded in January 2015. Of the total 1,611 licenses sold, 200 became available because certain winning bidders defaulted on payments, according to the agency.
Seventeen entities have qualified to bid, including major wireless carriers, plus SpaceX and AST SpaceMobile (NASDAQ: ASTS). New Street Research Policy Advisor Blair Levin has some thoughts on how the re-auction might play out.
The first AWS auction that ran from November 13, 2014 to January 29, 2015, featured what he terms “significant” participation from what the FCC calls “Designated Entities,” small businesses that qualified for bidding credits. These typically amount to 25 percent of the gross value of the license won, according to NSR.
Before the first auction, DISH formed partnerships with two DEs, Northstar Wireless and SNR Wireless. The DEs won licenses with gross bids that totaled more than $13 billion. With 25 percent discounts, they paid about $10 billion in total.
The FCC said DISH did not do anything illegal, but added that DISH had “de facto” control over the DEs, which made them ineligible for bidding credits, notes Levin in a client note. That meant DISH owed $3.4 billion more than it had paid for the licenses. Instead of paying, DISH returned them to the Commission. That triggered FCC fines. When the licenses are reauctioned, notes Levin, “DISH is liable for the difference between their bid and the winning bid in the second auction,” assuming a shortfall.
So as not to be called a “current defaulter,” in 2015, DISH paid $516 million, or 15 percent of the $3.4 billion outstanding balance, as an interim payment. When the spectrum is reauctioned, the default payment will be recalculated “as the lesser of 15 percent of the gross proceeds from the reauction or the $516 million DISH has already paid,” writes Levin.
DISH owner EchoStar (NASDAQ: SATS) and the FCC reached an agreement on the company’s potential liability ahead of today’s spectrum auction. In terms of the amount potentially owed by EchoStar, it’s effectively the same as the existing arrangement. The parties said in the settlement they were looking “to avoid disputes over debts and any litigation and resolve the administrative claims” around the auction.
That makes EchoStar responsible for any shortfall between the $3.4 billion and the re-auction gross proceeds. If the gross proceeds equal the outstanding obligation, EchoStar would owe nothing. NSR believes EchoStar/DISH is “unlikely” to have any liability in the reauction, because the reauction will likely clear a $2.9 billion benchmark.
The AWS-3 auction will not be a huge event from a capital markets perspective, according to Levin. “Single digit billions spread across three carriers (and potentially others) is easily managed within expectations of the capital budgets.”
NSR believes the auction will provide the first test in a long time for carrier appetites and spectrum values. The last major auction was the lower C-band auction. It raised what the FCC called a “record” $81 billion and ran from December 2020 through February 2021, Inside Towers reported. “In that sense, it sets the stage for the next major auction, for upper C-band licenses, set to begin in June 2027,” writes Levin.
By Leslie Stimson, Inside Towers Washington Bureau Chief
