Cable Seen Selling Own Wireless Service with AWS Spectrum
SpectrumCo’s aggressive bidding in the AWS auction may signal the cable operator group has bigger wireless plans than it let on, said analysts and investors. High bids Wed. from the Comcast-led partnership came on spectrum in areas where that company and other allies, including Time Warner, own cable systems. SpectrumCo members could go as far as selling full-service wireless instead of relying on a Sprint MVNO if the group wins licenses in those markets, Citigroup analysts said. That would give cable another leg up on DBS, which quit the auction (CD Aug 16 p1), said analysts and investors.
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“People are surprised that DBS is out,” Gabelli Value Fund’s Chris Marangi said: for cable, “the endgame is the same. It’s just a matter of them doing it themselves or doing it in conjunction with somebody else.” Falling wireless network construction costs are among factors that may lead SpectrumCo to bid more, Citigroup analysts including Jason Bazinet said: “Cable could emerge as a viable fifth player in the wireless market… SpectrumCo LLC is Comcast’s show. The other cable companies - and Sprint - are just coming along for the ride.”
SpectrumCo made a slew of high bids for “in-region major markets,” wrote Sanford Bernstein & Co.’s Craig Moffett. Round 19 winning bids included Comcast markets Chicago, D.C. and Denver; Time Warner areas around Columbus, O., and Chapel Hill, N.C.; and Bright House markets Tampa and Orlando. SpectrumCo’s high bids were $580.3 million. That figure is down from a round 9 peak of $1.78 billion. “Their interest in spectrum appears to go beyond competitive ‘blocking,'” Moffett said: “But what they might do with the spectrum is unclear.”
Another active cable bidder was Cablevision’s controlling family. Dolan Family Holdings made $390.1 million in high bids for Long Island, N.Y., area spectrum. Cablevision likely will benefit from any spectrum the family gets, said analysts. “Cablevision should not be impacted, since it is the Dolan family bidding on the licenses on its own,” said Prudential Equity’s Katherine Styponias.
Cable’s interest in the auction likely stems from desire to offer mobile video, Broadline Media CEO Steve Popper said: “I would speculate that they are watching their prized content being migrated and repurposed for a burgeoning mobile market, and they want to get in the game.” Popper’s firm sells Web video. Cable could use spectrum to lure small and mid-size business customers, he said: “Wireless could give cable better reach into businesses for all kinds of services where cable struggles with cabling and access problems.”
Wireless carriers aren’t sitting out the auction, with spectrum-starved T-Mobile the most aggressive participant. Its winning bids made up 37% of the roughly $9.8 billion total. “Some of the telecom players seem to be much more aggressive at this point” than cable, wrote Styponias. “Spectrum is valuable, anybody who gets it will use it,” cable investor Morris Mark said: “I would expect there would be a lot of bidding.”
Major wireless carriers continued to lead bidding Wed. as Verizon Wireless’s Cellco, Cingular and T-Mobile dueled for some of the most coveted licenses being offered. Bidding was active -- 242 new bids in round 19 late Wed. and 270 the round before. Cellco was leading bidder for 4 of the biggest licenses for sale -- the 20 MHz F-block regional licenses -- including $1.3 billion for the Northeast F-block license.
T-Mobile came on strong in round 19, entering 14 high bids for a wide range of licenses -- giving the carrier 69 provisionally winning bids, including 7 regional licenses, and total bids of $3.6 billion. T-Mobile is ahead in bidding for the remaining 2 F block licenses. T-Mobile’s provisionally victorious bids soared $1 billion more in round 19. Cingular has been active, with 47 provisionally winning bids worth $719 million, including 2 regional licenses. Designated entity MetroPCS had winning bids worth $1 billion- plus on 4 licenses.
“You're going to see some back & forth between Verizon and T-Mobile for a while longer,” a regulatory attorney who follows auctions said: “T-Mobile needs the spectrum and so does Verizon.”
The exit of DirecTV and EchoStar from the auction begs the question of whether satellite needs a wireless play at all. The DBS operators walked after bidding $1.4 billion in round 11. After using all 3 of its waivers in rounds 12-14, Wireless DBS threw in the towel in round 15.
“Does satellite even need to build out a wireless broadband platform?” Wachovia’s Jeffrey Wlodarczak wrote: “Tighter relationships with the RBOCs are likely to be more successful, with a focus on a lower home density wireless data strategy.” Last week, on the eve of the auction, DirecTV was plugging the strength of telco broadband bundling partnerships (CD Aug. 9 p8). DirecTV CEO Chase Carey made no secret of a tilt toward a wireless broadband venture, saying DBS will be working on various broadband strategies “side-by- side.”
Wireless DBS’s bidding strategy reflects a nationwide strategy, not a market-by-market approach like Clearwire’s, analysts said. Wireless DBS’s bidding suggested they'd be willing to spend $1.5 billion on nationwide broadband, said analysts. On a dollar/MHz/pop basis, they bid as high as $0.33/MHz/pop. - Jonathan Make, Howard Buskirk, Adrianne Kroepsch