Verizon spends $ 45.5 billion on top 5G spectrum providers

The results answered a question that has absorbed wireless industry investors since the Federal Communications Commission began the auction in December. Purchasing licenses to use certain radio waves are among the biggest controls a cell phone provider can write.

Wireless companies have been picking up increasingly large parts of the electromagnetic spectrum to meet the growing demand from their customers for music, video and software streamed to their smartphones. A shortage of assets can affect services, putting a carrier at a competitive disadvantage.

Verizon and its rivals are improving their 5G services this year after Apple’s launch Inc.’s

latest iPhone and other devices that can support the high-speed specifications. But Verizon’s need for the mid-range spectrum was considered particularly acute after T-Mobile amassed a significant cache of similar assets through its 2020 purchase of Sprint.

Verizon, the country’s largest provider in terms of subscribers, has focused much of its wireless investments on high-frequency millimeter-wave spectrum in recent years. Those licenses can support even faster internet speeds, but often struggle to transport data remotely.

The commission’s auction rules prevent bidders from commenting on the process for several days. AT&T, Verizon and T-Mobile will hold public briefings in March to update investors on their long-term strategies, including their network upgrade goals.

The most recent spectrum sale provided an opportunity for cellular companies, cable TV providers and other qualified bidders to expand their wireless operations into the C-band range, a swath of airwaves previously limited to satellite communications. The commission auctioned 280 megahertz off the band, leaving the rest to existing satellite users and surveillance bands to block interference.

Strong demand for the 5G-friendly frequencies led to a record $ 80.9 billion. A second phase, designed to sort the license types assigned to each bidder, brought the total to $ 81.2 billion last week.

Regional wireless provider US Cellular Corp.

USM 0.34%

offered $ 1.3 billion for licensing in select areas. A subsidiary of private equity firm Grain Management spent slightly less.

Other expected bidders largely remained on the sidelines. An affiliate of Dish Network Corp. offered $ 2.5 million, suggesting the satellite TV operator will rely on its existing cache of spectrum to build a new 5G network from scratch. C&C Wireless Holding Co., a joint venture of cable operators Comcast Corp.

and Charter Communications Inc.,

did not win any licenses.

Down payments on the spectrum licenses are due on March 10th. The winning bidders will also spend an estimated $ 14 billion more to cover the costs of the satellite operators shifting their operations to a narrower band of the spectrum.

The pledged amounts could have a lasting impact on the companies that bought the licenses. AT&T recently took out a $ 14.7 billion loan that includes spectrum purchases. Verizon took out a $ 25 billion term loan on Wednesday.

The carriers will use revenue from customers’ cell phone bills to repay those debts over time. Companies are widely expected to tout the broader benefits that 5G service brings to business devices, rather than smartphones, as a justification for the spending.

“They need to link some revenue to this huge check they are issuing,” said John Hodulik, an industry analyst at UBS Group. AG

Mr. Hodulik said Verizon will discuss in particular the benefits that C-band spectrum brings to its home internet customers. Combining the radio waves acquired this year with existing high-frequency spectrum assets could support a service that “could actually compete with cable,” he said.

The most recent auction was not the last chance for cell phone providers to secure midrange spectrum. Jessica Rosenworcel, the acting president of the FCC, this week proposed a plan that would launch a new auction for 100 megahertz of a similar mid-range spectrum in early October.

Write to Drew FitzGerald at [email protected]