Verizon Will Bid in Incentive Auction, but May not Pursue Major Urban Markets, CFO Says
Verizon will bid, at least at some level, in the TV incentive auction, said Chief Financial Officer Fran Shammo Monday at a UBS financial conference. But Verizon likely won’t pursue licenses for major urban markets like New York, he said. Shammo also confirmed that Verizon has some interest in buying at least part of Yahoo. In June, Verizon wrapped up (see 1510230054) its buy of AOL.
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“We'll participate in the auction, but I think you have to put the auction in perspective,” Shammo said. Verizon spent more than $10 billion in the record-setting AWS-3 auction, he noted. “AWS-3 was a very high auction because it was spectrum that everyone needed for densification purposes.”
The 600 MHz spectrum is “very good for coverage” but not for densifying the network, Shammo said. Verizon won’t even consider buying 600 MHz in major urban market like New York, he said. “It just wouldn't make engineering sense or financial sense to do that,” he said. “We can gather capacity much more efficiently through small cell and densification rather than 600.” Many unknowns about the incentive auction remain, including how many broadcasters will sell, Shammo said. “It’s kind of hard to get your hands around this auction until everything is set in stone and right now it’s still up in the air.”
Shammo said it’s too early to say whether Verizon will bid for Yahoo. “I mean, their board and investors have not decided what they're going to do with that asset,” he said. Shammo compared Yahoo to AOL. “We look at everything across the spectrum and if we see there is a strategic fit and it makes sense for our shareholders and we can return value,” he said.
T-Mobile Chief Financial Officer Braxton Carter said the carrier could spend $10 billion in the incentive auction, but will likely spend less. T-Mobile will add $6 billion to its balance sheet in anticipation of the auction, he said at the UBS conference Monday. “The $10 billion is a maximum theoretical [figure] that we went to the rating agencies with,” he said. “Our hope is that we will not be at the upper end of that range.”
T-Mobile plans to exercise discipline in its purchases, similar to its bidding behavior in the AWS-3 auction, Carter said. T-Mobile is also continuing to buy 700 MHz spectrum in key markets, he said.
“This is the first time in U.S. auction history we have a reserve,” said T-Mobile Chief Technology Officer Neville Ray. The spectrum reserve, set aside for carriers without significant low-band holdings in a market, “significantly limits” AT&T and Verizon’s “foreclosure capability” in many markets, he said. Ray said he's “super excited” about the auction.
Ray also said T-Mobile will look at a combination of urban and rural markets and markets where it has and doesn’t have low-band spectrum. “We want to add more spectrum at the right price for us,” he said. T-Mobile’s low-band footprint now covers 210 million POPs, he said. “We’d love to complete that national footprint,” he said. “A lot of that is more rural in nature … but we want to get that piece done.”
Shammo also said Verizon is doing tests in cooperation with the FCC to show LTE-unlicensed isn't a threat to Wi-Fi and is “actually complementary” to Wi-Fi. “I think if you talk to all carriers, they're going to say the same thing today, that that’s a technology that should be deployed in our networks,” he said. “It’s a complementary technology, but we have to work through the regulatory hurdles first.”