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Analysts Suggest Auction Bids May Fall Below Expectations

By Diana Goovaerts | January 15, 2016

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A Bloomberg survey of eight analysts painted a less than stellar portrait of spending in the upcoming FCC incentive auction, suggesting that U.S. carriers may bid significantly less than the FCC and broadcasters are hoping for.

According to Bloomberg’s figures, carrier offers for airwaves could total just $33 billion – nearly $12 billion less than hoped for by the FCC and a whopping $51.9 billion less than an estimate provided by consultants funded by the Expanding Opportunities for Broadcasters Coalition.

Bloomberg’s analysts put AT&T at the top of the spending bracket with an estimated $10.6 billion, followed by T-Mobile with $8 billion, Verizon at $6.2 billion and Dish at $4.7 billion. An estimated $3.6 billion is expected to come from other bidders.

Anxiety about who will bid and how much has risen following an announcement from Tier-1 carrier Sprint that it will sit out the auction and hints from U.S. Cellular that it, too, might skip.

After Sprint bowed out in September, Recon Analytics’ Roger Entner warned that revenues would likely fall below expectations.

“Sprint is the canary in the coalmine,” Entner said at the time. “It’s the first [major potential bidder] that simply said ‘No, thank you.’ Broadcasters should adjust their expectations. Eighty billion is probably not achievable.”

Though T-Mobile has visibly prepped for the auction with a $2 billion debt sale and CEO John Legere has vocalized the carrier’s intent to participate aggressively in the auction, uncertainties remain about just how much the Un-carrier will spend.

T-Mobile CFO Braxton Carter has left the door open for carrier to spend up to $10 billion in the auction, but said the company will likely be able to achieve its coverage goals with just $1 billion to $1.5 billion in spending.

Verizon and AT&T have been more tight-lipped about their spending plans.

In November, AT&T CFO John Stephens openly admitted the carrier is seeking a 2×10 MHz chunk of spectrum in the auction but refused to disclose how much AT&T is willing to spend to achieve its goal.

Earlier that same week, Verizon CFO Fran Shammo declared that the carrier will not be “held hostage” in the auction and will balk at sky-high prices for 600MHz spectrum. Shammo said he was also not interested in paying a premium to acquire Dish’s spectrum, and hinted that Verizon could build out its own small cell network if it doesn’t buy spectrum.

One wild card in the auction could be former Facebook executive Chamath Palihapitiya, who has said he plans to go head to head with industry giants in the auction. Palihapitiya said he plans to use any spectrum purchased in the auction alongside microcells and management from LotusFlare to develop a wireless network that can compete with Verizon and AT&T.

Palihapitiya said he plans to spend between $4 billion and $10 billion in the auction.

Applications for auction bidders must be filed between January 26 and February 9.


Filed Under: Telecommunications (Spectrum), Flanges • supports • mounts • brackets

 

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