The continued sale of wireless communications by the Federal Communications Commission has raised more than $ 69.8 billion after three weeks of bidding, a record amount that could change the outlook for mobile phone providers for the next decade.
Auction proceeds already exceeded the $ 44.9 billion raised in 2015 from a previous sale of mid-market mobile licenses, which US cell phone providers used at the time to improve their 4G service. Those companies are now investing billions of dollars in the next wave of fifth-generation coverage. The 5G standard promises to accelerate the flow of data to phones and other wireless devices such as PCs, cars and industrial machines.
The recent bids have blown past Wall Street’s highest predictions, suggesting several companies are fighting for the most valuable wireless rights. The 5G auction began on December 8 and will be paused for the holidays until January 4, when the total bid could go even higher.
Each bid is covered in secret until the auction process is over. Analysts expect big names like AT&T Inc.
and Verizon Communications Inc.
to walk away with much of the licenses to match assets that rival T-Mobile US Inc. conquered with the acquisition of Sprint in February.
“Mid-band spectrum will be where 5G lives,” said Walt Piecyk, a telecom analyst for research firm LightShed Partners. He added that T-Mobile’s merger with Sprint “clearly put pressure on Verizon and AT&T” to match their rival’s war chest.
“When the numbers get that big, you have to assume that everyone is going to be more aggressive,” said Mr Piecyk.
Mobile service providers also bid against investment firms and market entrants. Satellite provider Dish Network Corp.
won many of the licenses sold at the 2015 auction. The company raised more money this month through a $ 2 billion convertible bond offering to help fund more network investments. Dish is building its own cell phone network after buying assets and approximately 8 million Sprint customers.
Cable internet providers can also influence the outcome of the auction after years of experimenting with wireless services. Comcast Corp.
and Charter Communications Inc.
teamed up to bid in the current auction after spending nearly $ 1 billion on a smaller license sale earlier this year.
The radio frequencies offered range between 3.7 and 4 gigahertz, an average range considered very suitable for 5G service. New 5G smartphones can already connect to those frequencies in other countries that have released the spectrum. The US also sells large chunks of spectrum at once, adding to their value.
The high offers will benefit the US Treasury, which will collect a windfall after the winners pay for their licenses. The winners will also have to spend at least $ 13 billion more to help customize equipment for a group of satellite companies already using the frequencies. The satellite operators agreed to an FCC plan that shifts their TV broadcasts to a narrower portion of the radio spectrum known as the C band.
Cell phone providers can afford to pay large sums of money given their low funding costs and relatively stable service revenues, said Raymond James analyst Frank Louthan.
“Investors consider these companies to be some of the safest out there,” said Mr Louthan. “I don’t think a small change in debt would make much of a difference.”
The FCC will not announce the auction winners for several days after the auction ends, meaning the wider telecom industry could remain in suspense until February. Federal rules against coordinated bidding also limit what the auction participants can say about the process, limiting their ability to raise capital or negotiate large deals with spectrum.
Write to Drew FitzGerald at [email protected]
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