I must admit, I was a little taken aback when I heard that BDPCS Inc. defaulted on the down payment it was required to make for the 17 C-block pocket-phone licenses it won at auction. With more than $10 billion anted up to win licenses, I figured not all would go smoothly (this is the C-block auction after all), but I didn’t think problems would occur so quickly.
BDPCS came up $37 million short of its down payment requirement. The bidder blames a set of terrible circumstances, including what it says is a broken promise by U S West to help with interim funding through a bridge loan until BDPCS could go public.
Hmmm … BDPCS was the fourth largest winner in the auction, bidding $874 million, and yet it couldn’t come up with $37 million (relative pocket change for this auction). Granted, the company may have experienced some unusual circumstances and it does look like things went from bad to worse rather quickly.
Going public isn’t a new idea to gain financing, even in this new PCS industry. American Portable Telecom and Western Wireless have used IPOs to raise monies and NextWave reportedly is considering the option.
Still, IPOs are complex procedures and it puzzles me that a company that successfully bid on so many markets was betting on a successful stock offering as an integral part of its strategy. Talk about risky!
Maybe it’s time to look at how the Federal Communications Commission determines bidding eligibility. The defaulted C-block licenses could be auctioned off again, and there are still the D- E- and F-block auctions to contend with.
One unsuccessful PCS bidder has suggested that instead of the FCC correlating deposits with how many pops a company can bid on, deposits be used to determine the dollar eligibility of the company. In other words, a bidder with a larger deposit could place higher bids, while companies with smaller deposits would be restricted.
No one predicted the bidding frenzy that took over the C-block auction. But with companies paying much more for C-block licenses than their A- and B-block counterparts did, “per-pop eligibility” rules don’t seem to be as important.
And at this point, I think it would be foolish to assume that prices for licenses in the D- E- and F-block auction would be lower than those previously paid. After all, there could be a slough of unsuccessful C-block bidders who may pin their PCS hopes on the 10-megahertz auctions.
In fact, I think it would be foolish to assume anything at all about any spectrum auctions.
