Whittled down from 49 total applicants, 35 certified bidders placed more than $325 million in deposits with the government for a crack at 242 spectrum licenses up for bid in the 1.9 GHz band beginning on Jan. 26.
Those licenses include spectrum in a number of top markets, including Los Angeles, Houston, Minneapolis, Seattle, St. Louis, Pittsburgh and Denver. The Federal Communications Commission set minimum bids totaling more than $750 million for all the licenses available in the auction as well as setting aside 119 of the licenses for entrepreneurs, which historically have had trouble meeting the financial obligations building a wireless network.
But unlike the government agency’s last attempt to auction wireless spectrum as part of the ill-fated Auction 35 involving the infamous NextWave Wireless licenses-which generated more than $16 billion in winning bids in early 2001 that were later cancelled-a recent rash of mergers and acquisitions is expected to temper the bidding process during Auction 58.
Analysts said they expect the most aggressive bids to come from carriers that have sat out on M&A activity, singling out nationwide operators Verizon Wireless and T-Mobile USA Inc. The lack of large players aggressively bidding for spectrum also is expected to generate more activity from regional carriers that are often forced to pick through the leftovers.
“We expect bidding plans have changed with recent merger activity and believe national operators not involved in mergers will take the forefront in bidding as will non-traditional operators like Leap (Wireless International Inc.) and MetroPCS,” Inc., noted Raymond James & Associates in a research note.
While Verizon Wireless has made a number of sizeable spectrum acquisitions since Auction 35-including its recent purchase of NextWave Telecom Inc.’s sizeable spectrum portfolio late last year-Tole Hart, senior analyst of mobile communications at Gartner, explained that Verizon Wireless is always on the look out for spectrum and that the carrier will be thinking ahead for its spectrum needs.
“They are one of the larger players and will need the additional spectrum in the future,” Hart said, adding that the carrier also will have to keep its spectrum reserve topped up to support its CDMA2000 1x EV-DO high-speed wireless data plans, which include expanding services to 32 markets across the country.
Hart noted that T-Mobile USA could be a more interesting bidder, as aggressive bids by the nation’s soon-to-be smallest nationwide operator likely would signal its plans to begin rolling out UMTS-based data services.
“They need spectrum for UMTS,” Hart said. “If they don’t get it, those plans could be put on the shelf.”
T-Mobile USA has not announced plans to deploy wireless data technology beyond its planned EDGE deployment set for later this year, though published reports indicate the carrier is waiting until UMTS’ higher-speed HSDPA variation is available before moving toward a higher-speed data solution.
Less activity is expected from Cingular Wireless L.L.C., which recently completed its $41 billion acquisition of AT&T Wireless Services Inc. and said it would not participate in Auction 58 if the FCC approved the AWS acquisition with minimal divestitures. Cingular was forced to divest a handful of markets before gaining FCC approval and is linked with approved Auction 58 bidder Edge Mobile L.L.C.
Similar disinterest is expected from Sprint Corp. and Nextel Communications Inc., which announced merger plans last month. Sprint has a partnership with Auction 58 bidder Wirefree Partners III L.L.C., though analysts think the carrier will be selective in its bidding choices. Nextel has never been a big player in FCC auctions, and is in the midst of a contentious spectrum swap with the government agency.
With a small turnout predicted for the industry’s larger operators, regional players are expected to play a larger role in the auction. U.S. Cellular Corp., Leap, MetroPCS and Triton PCS Inc. are all backing qualified bidders that could be aggressive for select licenses.
“The regional carriers will likely go after markets contiguous to their current footprints, or in the case of MetroPCS, go after some larger markets if the price is right,” Hart said.
One name that was on the initial list of qualified bidders, but since moved to the non-qualified list is Sprint PCS affiliate AirGate PCS Inc. The carrier was initially thought to be looking at strengthening its relatively modest spectrum position in its Southeast footprint, but has since announced that it would be acquired by fellow affiliate Alamosa Holdings Inc.
