Bidding Stalled for Regional Licenses, as Action Shifts to Small Markets
The battle for the major regional licenses in the AWS auction appears close to its end, with bidding at a halt for those licenses in recent rounds - including the most valuable licenses of all, the 6 regional 20 MHz F block licenses. In the most recent bidding rounds, action has shifted from the 18 regional licenses to the smaller A, B and C blocks.
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“You've seen decreases in eligibility, people using waivers, and I think that basically [bidders] have moved on to local markets,” said analyst Walter Piecyk of Pali Research. “They're going to bid them up to their comfortable levels and that’s probably going to mark the end of the auction.” Michael Nelson, an analyst with the Stanford Group, agreed: “It has sort of settled… There’s always a potential for any of the larger carriers to make a larger bid when it comes right down to it, but it seems like they're kind of staking their claim here.”
Nelson predicted in a research report that the auction could continue as long as 2 months and bring in $15 billion. By round 20, prices were all over the board, with Cellco bidding an average of $0.74 per MHz/POP for the licenses it has provisionally won, compared to $0.24 for SpectrumCo, the cable joint venture with Sprint Nextel, and $0.37 for T- Mobile.
An industry expert on spectrum auctions said he expected the F-block part of the auction to effectively end quicker than for the smaller licenses. “The F-block is going to settle out first. It'll be either T-Mobile or Verizon,” the source said. “D and E is now pretty active and all the people who are pushed out of D and E are going to have to down to the [local licenses]. It’s a cascading effect. First you have the big licenses settle out and then the losers for the big licenses trickle down to the next biggest.”
At the end of round 23 late Thurs., with total bids in the auction at $10.9 billion, Verizon Wireless partner Cellco was the provisionally winning bidder for 4 of the F block licenses, with T-Mobile the winner for the other 2. Bidding for the F-block has been at a halt since round 16 when Cellco came in with its $1.3 billion bid for the Northeast F block -
a price that translates to $1.33 per MHz/POP.
SpectrumCo. is the most likely bidder to make a play for the regional licenses if anyone drives up the price of the spectrum, Piecyk said. SpectrumCo by round 23 had 109 provisionally winning bids worth $1.48 billion. T-Mobile also could take on Cellco for the F-block licenses.
“The cable group has a ton of eligibility,” Piecyk said. “They could mess around in local markets and bid up the value of the spectrum and the flip back to those regional licenses and start bidding on them… For markets like N.Y. or Boston there has been impressive bidding in those local markets… As the price per MHz/POP rises in the local markets it might be more economical to go back again into the regional markets.” Piecyk said T-Mobile, meanwhile, appears to be pursuing spectrum in the Northeast by bidding on many local licenses, but could change strategies. “They can piece together the regional market,” he said. “The question will be when the local markets catch up to the regional markets are getting priced do they also start flipping back and bidding on the regional markets.”
Verizon Wireless has denied it needs spectrum, or even whether it would participate in the AWS auction (CD April 6 p6). Sources said its assertive bidding appears to contradict those comments. “They need spectrum,” Nelson said: “It’s a combination of their subscriber base growing extremely rapidly over the last couple of quarters and also they have been building out their data network and increasing data traffic… They have always prided themselves on network quality and clearly with the growth that they're going through I think that they need additional spectrum.”
“If you listen to Verizon, they say they don’t need the spectrum,” one industry source said. “The fact is that of the big carriers they have the least spectrum other than T- Mobile. They don’t have all that BRS spectrum that Sprint has. I truly believe that Verizon needs to come out of this with 20 MHz nationwide.”
But Piecyk said Verizon Wireless may not be willing to increase its bids substantially for the regional licenses. “It seems like Verizon is fairly price sensitive,” he said. “It doesn’t appear that they would want to go much higher on those regional licenses.”