It looks like the third time likely won’t be the charm.
The FCC’s Stage 3 reverse auction closed late Thursday afternoon with a new $40.3 billion price target that showed just how low broadcasters weren’t willing to go to clear 108 MHz of spectrum.
The new target comes in at slightly more than 25 percent below the Stage 2 bar of $54.6 billion, a measured drop compared to the 37 percent price difference between Stages 1 and 2.
And analysts aren’t crazy about the figure.
Back in October, well before the Stage 3 reverse auction ended, BTIG’s Walter Piecyk said even if broadcasters allowed a second 37 percent drop between Stages 2 and 3, the resulting $35 billion price tag would likely still be too high for forward auction bidders.
“(A $35 billion price target) is still 60% higher than forward bids of $21.5 billion,” Piecyk wrote. “In that scenario, Stage 3 Forward bids would have to rise ~30% to over $27 billion in order to simply trigger the extended round rule. We believe it’s unlikely that forward bidders would move the auction up that much in Stage 3.”
In a Thursday tweet, Recon Analytics’ Roger Entner called the new target a “stretch goal,” possible “only if the stars align right, the wind is in your back, the road goes down hill.”
Dan Hays of PwC Strategy& Principal concurred, and noted the broadcaster’s reluctance to lower their demands despite clear indications from forward auction bidders in Stage 2 about how much they’re willing to bid could signal trouble.
“The relatively modest, 26 percent reduction in the clearing cost of the reverse auction is a strong indication that broadcasters are unlikely to give up their spectrum at anything but premium values,” Hays said. “At $40.3B, we believe that the cost is still far beyond the appetite of mobile network operators. This makes a fourth stage of the auction a virtual certainty. Even more disturbing is the notion that the large gap between the forward and reverse auctions could persist, and perhaps be an early indicator a potential eventual failure to successfully complete the auction altogether.”
Though most analysts agree a fourth stage of the auction is imminent, the FCC said earlier this week it is aiming to begin the Stage 3 forward auction on Monday, Dec. 5.
Filed Under: Telecommunications (Spectrum)
