The Big Four wireless carriers —Verizon, AT&T, T-Mobile and Sprint— and "very possibly" others, will be "fully engaged and sufficiently capitalized bidders" in a 2016 broadcast incentive auction that could raise as much as $80 billion from those wireless carriers.
That is the major takeaway from a just-released Kagan study commissioned by the Expanding Opportunities for Broadcasters Coalition, which is definitely hoping that is the case.
EOBC represents broadcasters willing to participate in the auction at the right price, which will require those wireless operators to pony up the bucks to allow the FCC to turn around and pay broadcasters that "right" price.
"Our analysis assumes the receipts from all bidders in the 600 MHz auction could well be in the $60 billion-$80 billion range, depending on how many megahertz are being sold once the final stage of the auction is reached," says Kagan Media Appraisals senior consultant Sharon Armbrust, who produced the report. "That range implies a doubling of the price paid for the 700 MHz spectrum sold in Auction 73 in 2008," and more than the low starting bar of $1.25 per MHZ/pop (a measure of spectrum value based on population reached), perhaps $2.50 Mhz/pop or higher.
The report points to a number of factors for that assumed robust wireless participation, including mobile data traffic growing by seven-fold over the next five years, available capital and the importance of getting more spectrum for Verizon and AT&T's business plans.
The study concedes that the "exuberant" bidding by AT&T and Verizon —and others— in the AWS-3 auction (a total of $44.9 billion) does raise the issue of what resources the carriers will have to bring to the table in a 2016 incentive auction, but concludes that carriers will be stepping up.
"Might AT&T and Verizon like to postpone going to the credit-market well again so soon (post-Vodafone for Verizon and following AT&T's DirecTV and Mexican deals)? Perhaps," says Armbrust. "Could Sprint and T-Mobile have more capital assets at their disposal at a later date? Maybe."
"But realistically, whenever the incentive auction takes place, the combination of surging wireless usage and demand, the desire to protect their franchises, the added foreclosure value of getting control of limited spectrum resources, the lure of low-band spectrum and the plans for generating new and lucrative cross-platform revenue streams should be irresistible drivers for the carriers to be there and bid hard for the spectrum that suits their needs," she says.
"This analysis by a respected veteran telecom analyst should put to rest the false notion that the auction needs to be delayed because of carrier financial considerations," said EOBC executive director Preston Padden.
Bernstein analyst Paul De Sa told investors Wednesday (Feb. 18) that he thought Verizon was "well positioned for the 600MHz broadcast-incentive auction, whenever it happens."