US telecoms not likely to make big spends in latest mid-band spectrum sale
Round one of the latest 5G spectrum auction in the USA started last Tuesday and preliminary indications are that it will be a more muted process than the latest C-band mega-sale.
33 bidders are participating in the Federal Communications Commission’s (FCC’s) auction of 100 Mhz of frequencies in the 3.45 Ghz band. Round one raked in US $609 million worth of bids, appreciating to $672 million following round two, the most latest to be finished at the time of writing.
The FCC has established a reserve price of $14.77 billion on the spectrum – primarily to cover sharing and relocation expenditure for federal users presently in the band – and obviously we’re some way from attaining that target yet. Indeed spectrum specialist, and BitPath COO Sasha Javid detailed it as a “slow start” in his analysis of the preliminary round, even though admittedly there is likely a lot more bidding to happen yet.
Analysts have shared considerably forecasting for the auction in its entirety. Javid has plumped for $22.5 billion – with the caveat that he was far off target in forecasting the massive $81 billion (in addition to relocation expenses) the C-band sale produced – and observes that the gentle beginning to proceedings appears to back up the conservatism.
Incidentally, there was a ton more spectrum up for grabbing in the C-band auction and a few telecoms have incurred massive expenditures to win it. These are both factors that will probably suppress dollar amounts involved in this 3.45 Ghz sale, or auction 110.
A lot, obviously, is dependent on how much the auction participants want the spectrum. And naturally, a few will be more willing to give away their cash than others. AT&T is most probable to make big spends, or at least biggish.
“AT&T badly requires spectrum in this 3.45 Ghz band to stay relevant as it only needed an average of 80 Mhz in the C-band auction and stays at a considerable mid-band spectrum deficit to Verizon and T-Mobile,” mentions Javid.
“The 40-Mhz cap that the FCC imposed in this auction is likely quite an annoyance to AT&T as it could leverage more,” he adds. However, he additionally points out the cap makes it more tough for competing bidders to shut out AT&T altogether.
The 40 Mhz cap is one reason why the ultimate total will not approach the C-band outcome, basically as telecoms have a preference towards big, contiguous spectrum blocks for 5G. On a connected note, Javid also illustrates the several coordination requirements the authorities have made mandatory on specific licenses in the auction, where the winner will be expected to share the band with army radar operations. The spectrum blocks in question could prove less attractive and draw lower prices than unimpaired blocks.
Going back to the telecoms, while AT&Ts major competitors are on the listing of auction bidders, they not probable to increase prices. Basically, Javid forecasts that Verizon will take part on a restricted basis, if at all – he believes the telecom spent an extra $3.5 billion than it wanted to at the C-band scale – while T-Mobile US already has the biggest amount of mid-band spectrum in the nation. However, “we do believe that T-Mobile will bid in this auction, if for no other reason to deny competition (for example, AT&T) the capacity to get spectrum at a low cost.” Javid forecasts. So that could make things interesting.
There’s additionally Dish to take into consideration – Javid estimates its forecasted expenditure at approximately $3 billion – and smaller and regional operators. So, summarizing, there appears to be adequate interest to keep the bidding moving, but not so much that we will spend in the upcoming weeks staggered by the running totals put out by the FCC.
As you would expect, the regulator is touting the sale in a pretty big manner.
“These airwaves are a crucial part of unlocking the 5G promise everywhere in the nation,” stated acting FCC Chairwoman Jessica Rosenworcel, when she made the announcement with regards to the impending beginning of the auction on Tuesday morning.
We are not aware of the direction the auction will go in, but it’s probable that Rosenworcel’s auction conclusion statement will carry with it a lot less hype than we observed at the conclusion of the C-band process.