The Federal Communications Commission’s Auction 97 came out of the Thanksgiving break with some momentum as this morning’s opening round generated $268 million in proceeds from 292 bids. The auction, which includes 1,614 spectrum licenses in the 1.7/2.1 GHz band, sat at nearly $38.5 billion in total potential winning bids at the end of round 38.
Bidders turned their attention to some of the smaller markets, with only two of the 20 most expensive licenses receiving new bids in the latest round. Those two included a new bid for the I-Block license centered on New York City, which now sits at $1.27 billion, and the I-Block license centered on Washington, D.C./Baltimore, which now sits at $440 million. The most active license was the G-Block license centered on Oklahoma City, which garnered three new bids in the latest round, pushing its price to $30.3 million.
The auction’s two most expensive licenses remain J-Block licenses centered on New York City ($2.46 billion) and Los Angeles ($1.96 billion).
The paired licenses up for bid include three 5×5 megahertz licenses (G-, H- and I-Blocks) and a single 10×10 megahertz license (J-Block). The G-Block licenses are carved into commercial market area-sized licenses, which total 734 licenses covering the country. The remaining blocks are economic area-sized that will total 176 licenses covering the country. The 15 megahertz of unpaired spectrum is split into two licenses, one with 5 megahertz of total spectrum parsed out on an EA basis, and the other with 10 megahertz of spectrum also in an EA configuration.
At the end of round 38, 18 licenses did not have a bid. The FCC is continuing to host four, one-hour rounds of bidding per day.
Winning bidders will not be announced until the auction ends, with the auction set to continue until there are no new bids placed in a round. Recent auctions lasted 167 rounds (H-Block), 261 rounds (700 MHz) and 161 rounds (AWS-1).
Financial concern
Financial analysts are beginning to show some concern regarding the money being thrown at spectrum licenses in the auction. Most pressing was the assumption that the AWS-3 band will be used to increase capacity in spectrum-constrained markets that are not likely to result in a heavy return off additional spending as opposed to lower-band spectrum that is often used to increase coverage and thus attract new customers.
Kevin Smithen, analyst at Macquarie Capital, recently noted that Verizon Wireless and AT&T are the two operators most likely to be spending the most in the current auction proceedings, and when combined with pricing pressure from smaller rivals Sprint and T-Mobile US, specifically noted that Verizon could see some financial impact.
“We believe that AWS-3 and 600 MHz spectrum costs will eat up most of [Verizon’s] surplus [free-cash-flow] post dividends and leave the company with limited flexibility for revenue-diversifying [mergers and acquisitions], unless it issues stock” Smithen said.
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