Auction Surprises: Dish Goes High, Comcast Goes Low and Verizon Does Zip

Stock market analysts covering the FCC’s auction results announcement were not surprised by the spending of T-Mobile ($8B), ‘the clear winner’ according to one market-watcher, or AT&T ($910M), but they did raise an eyebrow at some of the other players.

“What we did not expect was Dish Network spending $6.2B in the auction (through Wireless LLC), buying 18 MHz of spectrum on average nationally,” Craig Moffett of MoffettNathanson said. “We had expected Dish to be a de minimis player in the auction. Dish’s spectrum spending underscores the growing importance of the company’s valuation as it relates to their spectrum holdings,”  he said in a client report.  MoffettNathanson recently wrote a “deep dive” sensitivity mark-to-market valuations of Dish’s spectrum.

Amy Yong, analyst at Macquarie, said “Questions loom over Dish’s wireless strategy, as the enormous US$6.2bn spent in the auction leaves its ultimate intentions even less clear. Increasing its spectrum holdings raises its appeal, but adds regulatory hurdles in a deal. At US$1.31/MHz PoP, our Dish valuation would rise to US$72 from US$70.”

Comcast was another head-scratcher. “We had widely expected Comcast to spend about $6B net of proceeds from the reverse auction… but Comcast spent only $1.7B in the auction (through CC Wireless Investment),” Moffett wrote. “Comcast bought 10 MHz of spectrum covering about 145M POPs in their own footprint. Comcast bought 10 MHz of spectrum in New York, Chicago, San Francisco and Philadelphia, among the major” Partial Economic Areas. “They did not buy any spectrum in Los Angeles or Dallas,” he said.

Macquarie’s Yong was a little less surprised, saying Comcast’s tendered offer was “consistent with their crawl, walk, run wireless strategy. Comcast spent a mere US$1.7bn” Yong said. “It will also receive US$482m in proceeds for NBC. While this placates near-term concerns about wireless, it also leaves dry powder for acquisitions down the road,” she said. “Of note, the Comcast-NBCU consent decree expires early ’18. In the meantime, we look forward to a competitive commercial launch in 2H17,” Yong said.

Shockingly, Verizon spent exactly $0. “We had expected the operator to buy a nominal amount of 600 MHz,” Moffett said. Yong observed “Dish’s outsized investment in spectrum could make it more appealing to Verizon, who did not secure spectrum in the auction.”

Down payments are due April 27 with the “quiet period” for wireless bidders to end shortly after. Yong said after a 39-month repackaging, spectrum could be available as early as ’20.

April 17, 2017


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