Verizon, Gabelli Make Biggest Upfront Auction Bids
Verizon Wireless and investor Mario Gabelli are among those signaling they plan to play a big role in PCS Auction 58, starting Jan. 26, based on information released by the FCC late Tues. Early indications, meanwhile, were that the FCC could see an active, competitive auction. As expected, 4 of the 5 national carriers will participate. Also, 2 formerly bankrupt carriers, Leap and MetroPCS, made major upfront bids. Altogether, 35 companies put in $325.3 million - less than 10% of what the auction is likely to fetch.
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“At this stage usually it’s confirming who is serious and who’s putting up the money,” said an attorney who follows auctions. “This is pretty competitive for 242 licenses. It should be a good auction.” A 2nd attorney said: “In the main, it’s pretty much predictable. The big guys are in the auction, either on their own or as investors in designated entities or both.”
“As these companies are preparing to bid in both Auction 58 and the 3G auction [next summer] there are a lot of unanswered questions,” said Legg Mason analyst Rebecca Arbogast. “The big one that swamps all the rest is how big the appetite will be for all these bandwidth- hungry applications.”
In the auction, the FCC is selling 242 licenses turned in by previous bidders, including the licenses NextWave returned. The major carriers that are bidding are doing so in combination with smaller entities so they're qualified to bid for all of the licenses offered for sale, including those that must go to smaller carriers known as designated entities. Most observers expect the auction to bring in considerably less than the $16.8 billion bid in Auction 35, the original NextWave reauction, including more than $8 billion from Verizon Wireless.
The largest single bidder based on upfront payments was Magvir Communications, which is controlled by investor Mario Gabelli. Magvir bid $46.7 million. Gabelli has bid in the past in other auctions. Eight bidders came in at $25 million or higher.
CSM Wireless is another non-carrier to make significant upfront bids totaling $30 million. Investors in that entity include Columbia Capital, the firm founded by Va. Gov. Mark Warner (D), which has been active in buying spectrum in the secondary market.
Verizon Wireless, participating through Vista PCS, in which it owns an 80% stake, made upfront payments of $25 million. The carrier also made upfront payments of $35 million through its Cellco subsidiary. Last week, CEO Dennis Strigl said the nation’s 2nd largest carrier would bid in Auction 58 though it essentially has all the spectrum it needs for operations through 2010. Several sources said they were surprised Verizon’s upfront bids were as high.
Cingular -- the largest U.S. carrier, which like Verizon is considered spectrum rich -- made upfront payments of $36.9 million through partner Edge Mobile, in which it owns an 85% stake. T-Mobile, which has indicated it hopes to fill in its spectrum portfolio, entered upfront bids of $35 million through partner Cook Inlet. Sprint, which is merging with Nextel, had an upfront bid of $30 million through Wirefree Partners.
Other carriers participating through bidding partners including U.S. Cellular, with Carroll Wireless ($9 million in upfront bids), Leap Wireless, through Alaska native Broadband ($17 million), and MetroPCS, with Royal Street Communications ($25 million). Leap is also participating in bidding for non-designated entity licenses.
“We're looking forward to getting this spectrum out into the marketplace into the hands of people who can use it to serve the public,” said a spokeswoman for the Wireless Bureau.