Auction 97 Exceeds Expectations, Say Analysts
After 22 rounds, the AWS-3 auction has reached more than $28.7 billion in provisionally winning bids, demonstrating strong momentum for the 2016 broadcast spectrum incentive auctions, and showing that Dish Network’s spectrum is of high value, some analysts said. By the end of Round 22, bidding for spectrum covering the New York City area reached more than $1.7 billion, and more than $615 million was bid for spectrum in the Washington, D.C., area, according to the FCC website. AT&T and Verizon are likely top bidders, some analysts said.
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The strong bidding for AWS-3 is a “bullish sign for the success of the incentive auction,” said Expanding Opportunities for Broadcasters Coalition Executive Director Preston Padden. Broadcast spectrum is scarce low-band spectrum that's inherently more valuable than the AWS-3 spectrum, he said in an interview. The AWS spectrum has to be cleared of current government users, “so it will be years before that becomes available,” he said. Wireless carriers will likely be bidding huge amounts for broadcast spectrum, he said. It travels longer distances and goes through buildings, making it “beachfront spectrum,” he added.
Padden said the still-rising bids for the auction came as a surprise. The aggressive bidding is likely due to “the fact that we have surging public demand for wireless broadband and a genuine shortage of spectrum,” he said.
Moffett Nathanson analysts said they were “dead wrong” in early summations that wireless carriers weren’t generating enough cash to bid aggressively. The size of bids may reflect skepticism that even 2016 is a viable time frame for the incentive auctions, “hence carriers are racing to get what they can now in preparation for a longer delay,” analysts said in a research note. But one must concede that the higher prices for AWS-3 argue for even higher estimates for the more-valuable 600 MHz spectrum, they said. “That should make it more attractive to broadcasters to participate, increasing supply and potentially reducing their incentive to further delay the process.”
The outlays by wireless operators in AWS-3 “could well imply aggressive carrier bidding” in the 2016 broadcast incentive auction, said Paul Gallant, Guggenheim Partners analyst. “Another big auction spend by wireless carriers in 2016 would clearly be a positive for broadcasters considering selling spectrum,” he said in a research note.
The auction for AWS-3 is the “one to watch,” compared with the upcoming incentive auction, said Rick Kaplan, NAB executive vice president-strategic planning. It’s a “terrific success,” and it’s “very likely to yield more money for the government than the incentive auction,” he said in an email. This auction demonstrates that there's a ton of money out there for any wireless auction or “that the carriers are nervous that the incentive auction is going to fail,” he said. The AWS-3 auction is “their one chance to purchase spectrum from the government,” he said. The success of Auction 97 also gives the commission “much needed breathing room on the incentive auction,” he said. “There is now a ton of unused spectrum in the marketplace.”
The bids placed during Auction 97 reaffirm the value of Dish’s AWS spectrum, said Wells Fargo analyst Marci Ryvicker. It's more valuable than any block for sale in the AWS-3 auction, she said in a research note. Dish’s AWS-4 spectrum is 40 MHz of contiguous spectrum, she said. Dish’s waiver to convert 20 MHz of that uplink spectrum to downlink spectrum makes that spectrum more valuable “given the asymmetric nature of mobile data,” she said. The Auction 97 results “argue for a positive revision to valuation estimates” for Dish’s AWS-4 spectrum, Moffett Nathanson analysts said. Carriers will have to factor in even higher demands for capital in 2016, “potentially dampening whatever appetite they might otherwise have for Dish’s spectrum in the interim,” they said.
The value placed on spectrum in the auction is a positive for wireless towers, said New Street Research analysts. Deployments of AWS-3 spectrum are expected to drive significant amendment activity from 2016-2018, they said in a research note.