Bidding in the FCC’s forward auction may have hit more than $13 billion at the end of Round 11 on Tuesday, but BTIG isn’t holding its breath offers will make it past the towering $88 billion price target set by broadcasters.
In a Monday research note, BTIG’s Walter Piecyk reiterated the financial firm doesn’t expect the forward auction’s 62 participants to hit the mark on the first try. Rather, he said, BTIG is looking toward a Stage 2 reverse auction to take place as soon as early October to lower the forward auction spectrum – and price – clearing target.
Piecyk said the Stage 2 reverse auction could wrap up within the month of October and a Stage 2 forward auction could commence within a week of the reverse auction’s end.
BTIG’s stance on this matter is far from unique.
When the FCC announced the Stage 1 reverse auction concluded with a clearing cost of $86.4 billion in June, analysts across the board – including Recon Analytics’ Roger Entner and Dan Hays of PwC’s Strategy& – said it was all but inevitable a second round would be necessary to lower the bar.
However, as Piecyk pointed out, it could take more than even two tries to find the right balance of spectrum and price for forward auction bidders.
“This auction process continues for as many stages as it takes for the forward auction proceeds to top the clearing target, which is comprised of reverse auction bids plus ~$2 billion of clearing and administrative costs,” Piecyk wrote. “Assuming the three national operators want to grab 20MHz per market, the auction and prices drop quickly in the reverse auction, it could take 4 stages resulting in 70 MHz of cleared spectrum for wireless operators to end the Auction.”
Should the bidding dictate the necessity of four stages, Piecyk said, bidding in the final forward auction could stretch into March 2017.
Indeed, the FCC has previously said it is ready for the possibility that the auction could run into fiscal year 2017.
FCC Chairman Tom Wheeler in July told the House subcommittee on Communications and Technology the commission is “fully prepared” to implement additional stages of the auction.
“The Commission intentionally designed the auction to account for the possibility that supply and demand might not match at the initial clearing target,” Wheeler said. “It’s something we planned for, and we’re fully prepared to implement if the need arises.”
Filed Under: Telecommunications (Spectrum)