Verizon Dials Down Expectations for TV Incentive Auction
Verizon Chief Financial Officer Fran Shammo sounded a note of caution on the outlook for the TV incentive auction, on a Tuesday quarterly earnings call with analysts. Shammo said the 600 MHz spectrum that will be auctioned by the FCC doesn’t fit well with the 700 MHz spectrum Verizon already owns. Verizon reported earnings of 99 cents per share on revenue of $33.2 billion, which was slightly above analyst estimates.
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Verizon was the dominant bidder in the 2008 700 MHz auction, buying the six 22 MHz regional licenses covering the continental U.S. and the license for Hawaii, for $9.63 billion (see 0803210100).
Verizon can make use of 600 and 700 MHz in a single market, “but 600 MHz and 700 MHz don't play well together,” Shammo said. “There is a lot of interference. So, where we have 700 MHz, there will be a lot of work to deploy 600 MHz spectrum.” There are places “where we could use lower band spectrum, but it's probably not the top priority,” he said.
Shammo said the FCC must provide additional clarity on rules for reselling the incentive auction spectrum in the secondary market, a concern also raised by smaller carriers at the Competitive Carriers Association’s recent convention (see 1510090022). “We'll just wait and see,” he said.
Verizon really needs mid-range “capacity” spectrum, which is why the carrier went big in the AWS-3 auction, Shammo said. “Higher frequency spectrum is capacity and that’s really what we need at this point in time.” In some markets, like New York and Chicago, where spectrum is expensive, deploying small cells has been a good alternative to buying spectrum, he said. Verizon views the mid-band spectrum owned by Dish Network as “very good spectrum” that's “very good for capacity,” he said.
Verizon also is very interested in LTE-unlicensed, Shammo said. “We are actually testing in the labs now and we are looking to deploy some time in 2016.” LTE-U can also help Verizon increase the capacity of its network and is more spectrum-efficient than Wi-Fi, he said.
Verizon continues to grow, especially on the wireless side. The carrier added 1.3 million net retail postpaid connections in the quarter, with postpaid churn of 0.93 percent. Verizon said in the first nine months of 2015, it invested about $22 billion in spectrum licenses “and capital for future network capacity.” Verizon said $23 billion of its revenue came from wireless operations, $4 billion from wireline and $3.4 billion from FiOS.
Shammo said Verizon remains committed to FiOS and wireline. “We are investing over $4 billion into the wireline company a year,” he said. “That shows our commitment from a capital investment perspective. We've already passed 20 million homes when we committed to originally 18 million.”
Communications Workers of America slammed Verizon. “Yet again, Verizon’s quarterly report shows the strength of the company’s bottom line,” said Bob Master, assistant to the vice president, CWA-District 1. “But despite another almost $1.5 billion dollars a month in profits, Verizon continues to ignore millions of consumers who want its high-speed network in both cities and rural areas. At the same time, the company turns its back on its workers, demanding the right to ship even more family-supporting jobs overseas. Verizon should stop stalling and negotiate a fair contract.”