Sprint Decision To Sit Out Incentive Auction Not Seen as Surprise
Sprint said it won't take part in the TV incentive auction, becoming the first major player to announce it will definitely sit it out. Industry officials said Monday that the Sprint announcement Saturday raises new questions for the FCC, but wasn't a surprise. The departure of Sprint could also be a net win for T-Mobile and other competitive carriers that now have a clear path to buy the 30 MHz of reserve spectrum set aside for providers with significant low-band holdings in what is expected to be a large number of markets, industry observers said.
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“Sprint’s focus and overarching imperative must be on improving its network and market position in the immediate term so we can remain a powerful force in fostering competition, consumer benefits and innovation in the wireless broadband world,” Sprint CEO Marcelo Claure said in a news release. “Sprint has the spectrum it needs to deploy its network architecture of the future.”
Sprint didn't participate in the past three major spectrum auctions -- AWS 1, AWS 3 and the 700 MHz auction. Sprint executives have said repeatedly they believe that they have a strong spectrum portfolio without the 600 MHz spectrum to be offered in the incentive auction. Claure recently said the carrier was close to making a decision (see 1509180013).
“It can’t be a surprise that Sprint is going to sit this one out,” Craig Moffett, analyst at MoffettNathanson, told us. “Simply put, they don’t have any money.” The move means T-Mobile could largely have the reserve to itself, he said. “But that dynamic alone might be enough to entice Comcast to stick its toe in the water and bid.”
The FCC probably needs to rethink holding the incentive auction so soon after the recently concluded AWS-3 auction, said Walter Piecyk, analyst at BTIG. “If the FCC can't clear enough spectrum we may end up seeing incentive auction part 2 in a few years.”
Commissioner Ajit Pai said in a statement Monday that Sprint’s decision shows the “folly” of the spectrum reserve and the move to pick "winners and losers" before the auction starts. “It also intensifies doubts about how competitive the bidding will be for set-aside spectrum and whether American taxpayers will receive fair compensation for that scarce public resource,” Pai said. “Sprint’s announcement only strengthens my belief that the FCC should not have granted a spectrum giveaway in this auction or placed artificial limits on carriers’ participation.”
T-Mobile CEO John Legere tweeted on the development. “Tough times at @Sprint?! They are crazy to sit out this historic auction! Others will show up thanks to the reserve,” he said. Legere also promised T-Mobile is “going to go hard” after the 600 MHz spectrum.
“Sprint is facing a fair number of pinch points, and spectrum isn’t one of them,” said Doug Brake, telecom policy analyst at the Information Technology and Innovation Foundation. “This is a rare opportunity to repurpose spectrum, so the more participation the better. But a company needs "real gains in such a bargain, and those aren’t necessarily there for Sprint," he said. Brake said Claure has made clear the company’s focus is on densifying its network and building out the mid-band spectrum it has from its buy of Clearwire.
Sprint's decision shows the carrier will focus on “lucrative” urban markets “where their high frequency holdings are advantageous and leave rural” to AT&T, T-Mobile and Verizon, said Richard Bennett, visiting fellow at the American Enterprise Institute: “Once again, the FCC's hopes for a four player national market are dashed.”
Sprint's dropping out will have “no effect” on the auction’s success, said Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition. Sprint’s capital structure doesn’t permit it to bid aggressively, he said. “We are confident demand will be strong.”