Republican Administration, End of Auction Quiet Period, Seen Conducive for Getting Deals Done

Lots of speculation focuses on Dish Network and its plans for its spectrum. The quiet period has meant little merger-and-acquisition activity for more than a year. That, combined with speculation the Trump administration will be more open to deals than the Obama administration, despite the lack of track record, could mean a flurry of activity, industry observers said. The quiet period for participants in the forward auction started Feb. 10, 2016. It will continue for forward auction participants 10 days after the auction closing public notice, which will list winning bidders and is expected in mid-April.

A​ wireless carrier official said there's lots of speculation about what transactions might get announced, especially Sprint/T-Mobile. “When the incentive auction finally concludes in late April, the window will open on what many expect to be an unprecedented wave of spectrum deal-making,” MoffettNathanson wrote investors.

“There are a number of factors aligning, leading to an expectation of a busy couple of years for telecom M&A,” said Doug Brake, telecom policy analyst at the Information Technology and Innovation Foundation. “The quiet period has been an artificial constraint for some time, plus with a Republican administration bringing generally less restrictive conceptions of vertical harm and more flexible market definitions, it is possible we see some large transactions.” Which deals will happen is hard to predict, but a Sprint/T-Mobile combination seems likely, he said. Brake said with all the likely M&A, “this is an important time for antitrust and competition policy.”

Deals

“There are still considerably more sellers than buyers in the U.S. telecom space as it is hard to see who besides Sprint is interested and able to purchase T-Mobile USA,” said Roger Entner, analyst at Recon Analytics. “While it is possible that Sprint will bid for T-Mobile, it is clear that it will be a costly undertaking. T-Mobile is growing in leaps and bounds at the expense of the other operators and performance like that comes with a hefty premium.” Sprint and T-Mobile didn't comment. Masayoshi Son, CEO of Sprint parent SoftBank, was considered eager to pursue T-Mobile, though the company was unable to make an offer during the prolonged quiet period (see 1702220048).

Lots of questions remain about Dish after its announcement it will build a NarrowBand (NB) IoT network, to launch by March 2020 (see 1703080026), Entner said. The announcement “indicates to me that they are still buying time and are not ready to deal,” Entner said. Dish didn't comment.

“On the broadcast side, you are likely to see an uptick in TV deals in the wake of the lifting of the quiet period and the end of the reverse auction,” said Francisco Montero, managing partner at Fletcher Heald. “I think there are many TV stations out there that were in the auction but never sold. Some of those were deliberately bought by speculators to sell in the auction and others are held by broadcasters that were prepared to cash out. So now they find themselves with stations they thought would have been sold in the auction. As a result, potential buyers smell deals out there and are looking to pick up potentially undervalued TV properties before the prices come back up.”

Free Press Policy Director Matt Wood said public interest groups are likely to view some possible combinations with skepticism. “We're on the watch for unchecked consolidation and the lies used to support it,” Wood said. “The notion that horizontal mergers improve competition by making competitors stronger, and similar tall tales, deserve as little credence as the ISPs' claims that demolishing privacy rules improves user privacy. Look at the reaction this week -- all of America is laughing at congressional Republicans' and cable lobbyists' hypocrisy. People want real choices and real protections for their communications rights. Politicians and regulators would be wise to listen to this loud and clear message" (see 1703310066).

Broadcasters

For broadcasters, the end of the incentive auction is mostly significant for removing one more barrier between them and the start of the 39-month repacking countdown, their lawyers told us. That countdown will be kicked off by the release of the closing and channel reassignment PN -- the formal announcement that the auction is over -- which is what most TV stations are looking toward, said Fletcher Heald broadcast attorney Dan Kirkpatrick.

The end of the assignment phase could mean something for broadcasters because it led to a small increase in the auction funds going to the federal coffers. Station lawyers said the more auction money that goes to the Treasury, the better broadcaster arguments for an increase to the $1.75 billion reimbursement fund. The $145 million added by the assignment phase is too small to do much to shift that argument, said Wiley Rein's Ari Meltzer.

Broadcasters are primarily looking to the release of the CCR PN, because along with kicking off the repacking countdown clock, it will allow them to move forward with repacking plans. The CCR will disclose the channel assignments of all broadcasters in the auction, necessary information for repacking planning, attorneys said. Though all broadcasters have received their channel assignments, not all have chosen to share that information with their neighbors, said a broadcast attorney.

The announcement of the auction’s end could spur into action broadcasters that have yet to begin repacking preparations, lawyers said. Broadcasters that haven't contacted consulting engineers to begin assessing their repacking needs are going to find it is becoming difficult to set up such an appointment, broadcast attorney Jack Goodman said.

The Incentive Auction Task Force and the Wireless Bureau released a public notice Friday on the file formats of the results of the incentive auction that will be released in the incentive auction closing and channel reassignment PN in mid-April. The formats are available on the websites for the reverse and forward auctions. Also online is a post-auction tutorial for forward auction participants “designed to help forward auction bidders familiarize themselves with the steps that will follow the conclusion of the auction,” the PN said. The tutorial provides “a timeline of the immediate post-auction process for the forward auction, a preview of the Incentive Auction Closing and Channel Reassignment Public Notice, information about making post-auction payments and requesting refunds, and information about the licensing process,” the PN said.