Auction Surpasses $10 Billion as Week Two Starts
The 700 MHz auction passed a second important milestone Wednesday as bidding exceeded the FCC reserve price of $1.8 billion for the A-block of 176 12 MHz economic area (EA) licenses, the second smallest geographically offered in the auction. That means there won’t be a reauction of the entire block. Provisional winning bids in the 700 MHz auction totaled $11.6 billion after 16 rounds.
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Bidders exceeded the B-block reserve price Tuesday in round 10 and the A-block reserve price Wednesday in round 14. “This means that 24 MHz of the total spectrum is no longer subject to a potential re-auction, and we expect the 6 MHz E- block to follow shortly,” Stifel Nicolaus said in a research report.
Two big question marks still hang over the auction. One is whether bidders will meet the $4.6 billion reserve price for the massive regional licenses sold through the C-block. The top bid at this point is $4.2 billion for licenses covering the whole U.S. Bidding for the regional licenses outside the 50 states hasn’t been strong. For example, the top bid for the regional license covering American Samoa was only $13,000, compared with $862,000 for a license covering Puerto Rico and the U.S. Virgin Islands. On Wednesday, a potential licensee offered $602,000 for the Gulf of Mexico regional license.
The other question is whether any company will come forward with a winning bid for the D-block public safety spectrum. Sources say a bidder could still meet the $1.3 billion reserve price, but that seems increasingly unlikely as the auction progresses. “It’s unlikely but not impossible,” an industry source said. The lone bidder, in round one, offered $472 million.
Stifel Nicolaus speculated that bidding in the C-block for the U.S. licenses is being led by Google. “If there is no activity in the next few rounds following the round that satisfies the reserve price… that could mean either that Google was the only bidder in the later rounds and will have captured the spectrum, or that Verizon -- or possibly another incumbent -- outbid Google on the reserve triggering round,” the firm said. “We may not know for certain which until the FCC announces the winning bidders, which could be a while… Given the level of activity in the lower blocks, assuming the C Block is sold, the $10 billion aggregate target prices will have been satisfied, and the FCC can declare the auction a success, except for the public safety D-block.”