Verizon Nearly Lost Bid for National C-Block License

Wireless Strategy Principal Tom Peters reads the auction results as making Qualcomm the early major bidder for the 22 MHz C-block, he told us. “It is possible that Qualcomm thought they had a chance to get C as long as no one else got involved, and gave up as soon as they were challenged,” Peters said. “When Verizon started bidding on C in Round 27, Qualcomm probably decided that they were not going to be successful and quickly gave up.”

But Verizon Wireless’s glide path to a national license was not completely clear, Peters said. The carrier exceeded its eligibility by 115 million bidding units combining the C-block spectrum with the company’s high bids in the A and B blocks, he said. “Verizon was not able to place any new bids after Round 30, and this is significant because it means that if someone had placed a counter bid on Mississippi Valley or any of the other C block licenses, Verizon could not have done a thing and would have lost their nationwide footprint,” he said. “After Verizon won the C block in Round 30, there were only two companies with enough bidding eligibility to challenge them -- Google and EchoStar [Dish] -- and luckily for Verizon, neither was interested.” Verizon Wireless ultimately was high bidder for the C-block nationwide, except Alaska.

AT&T paid almost three times as much on average as Verizon Wireless, which got the C-block national license at a comparative bargain price, Stifel Nicolaus said. Verizon acquired 8.5 billion MHz/POPs for $9.36 billion, an average price of $1.10/MHz/POP, the firm said. AT&T acquired 2.1 billion MHz POPs for $6.64 billion, an average $3.15 per MHz/POP. The firm also said the average price paid in the auction was $1.28 per MHz/POP, compared to $0.58 per MHz/POP in 2006’s advanced wireless services auction. The top price for a license was Verizon’s bid of $9.19 per MHz/POP for the Chicago B-block license.

Other analyst firms are deconstructing the auction. Stanford Group said Monday in a note that “aggressive” acquisition of spectrum by Verizon Wireless and AT&T makes either unlikely to try to buy Sprint-Nextel. “In addition, Verizon is likely to build-out areas where it currently has roaming agreements, which could negatively impact Alltel,” the firm said. Stanford Group said the fact that MetroPCS and Leap Wireless bid “less money than expected” is “positive for both companies.” Leap came away emptyhanded. MetroPCS bought only the A-block license for Boston, so it’s likely to add that city to its list of expansion cities, the firm said.

Leap and MetroPCS “did not advance any new competitive fronts against one another” via the auction and “kept plenty of powder dry for developing existing spectrum holdings,” said Banc of America. The firm predicted that, once anti-collusion rule limits run out, “speculation will begin anew” about a merger between the two small carriers. Strong Verizon and AT&T auction participation means they “are likely to remain the dominant wireless players for some time,” the firm said.

Anti-collusion restrictions’ end next week will be followed by a round of merger discussions by carriers, said analyst Jessica Zufolo of Medley Global Advisors said. “We expect a second round of consolidation to occur in the sector this year given strong concerns among carriers and shareholders that merger reviews will be more difficult if a Democrat wins the presidency in November,” she wrote. “As a result, we expect firms to work furiously to file merger applications as soon as possible.”