WASHINGTON-With the auction of local multipoint distribution service scarcely a week old, the battle lines for leadership have been drawn between WNP Communications and McCaw/Nextel-backed Nextband Communications, with wireless local loop player WinStar LMDS L.L.C. in close pursuit. On the other hand, some initial bidders-including Southwestern Bell Video Services-already have re-evaluated their commitment to the bidding and have walked away.
Besides SWB, others that decided LMDS was not going to be part of their business plans include Aurora Telecommunications L.L.C., Alexcom Inc., Brookings Municipal Utilities; Conectiv Communications Inc., D&E Investments Inc., High Plains Wireless L.P., Intek Diversified Corp., James C. Philipp, Nemont Communications Inc., Pegasus Development Corp., Roseville PCS Inc., Rural Telephone Service Co. Inc., Sioux Valley Rural Television Inc., Triangle Communication System Inc. and CS Wireless Systems.
At the close of Round 21 last Thursday, net revenues reached $440 million, with 220 new bids and 171 new high bids. Most of the revenue has been garnered by the A block of LMDS licenses (80.6 percent), with the rest funneled to the B block (19.4 percent).
The most expensive property on the market so far is A-block Los Angeles, owned at the end of Round 21 by Nextband for $36 million; the Los Angeles B block was held by U S West for $5.3 million. These bidders also hold the San Francisco blocks, with Nextband tapping the A block for $25.3 million and U S West the B block for $4.9 million.
WNP pledged $23.7 million for New York City’s A block, and WinStar held the B block for $6.3 million. Chicago was third, with WNP holding the A block for $17 million, and Baker Creek Communications L.P. (a 45-percent-discount, Coudersport, Pa., concern headed by John C. Rigas that has spent $14 million thus far on 237 high bids) had Round 21 dibs on the B block for $2.9 million.
Individual net bidding numbers have fluctuated wildly at the end of each round. WNP’s bids at the end of Round 21 were $139 million; at the end of Round 20, bids totaled $95.8 million; at the end of Round 19, $137 million; and at the end of Round 18, $89.5 million. Nextband was in the same situation, with its bids ending at $114 million in Round 21; $119 million in Round 20; $93 million in Round 19; and $125 million in Round 18. Other bidders in the Top 10 experienced the same see-saw effect.
“The auction is moving ahead faster than I had thought originally,” said Mike Hunter, who is following the bidding for Washington, D.C., law firm Lukas, Nace, Gutierrez & Sachs. “We’re in Stage 2 already, and we could go into Stage 3 this week.” Hunter has scaled back his first notion that the auction could last up to six months; he now says it could be as short as two, with no fewer rounds than 100. Hunter added that many players are positioning themselves for Stage 3, where they will make definitive stands on certain markets.
According to Hunter’s calculations, 175 blocks have not been bid since the auction began Feb. 18, and others have not been bid up since Round 1. “People are waiting for the FCC to lower the minimum bids on these untouched markets, but I’m not sure that will happen,” he said. “These could be saved for a reauction. There’s a big game of chicken going on here.”
