WASHINGTON—The Sprint Nextel Corp.-cable TV joint venture today took the first step toward competing for spectrum at the advanced wireless services auction this summer, a move with implications for the No. 3 mobile phone carrier and cable TV operators as they attempt to strengthen their respective market positions with expanded bundled offerings.
“We are … evaluating whether it would be a good idea to have a more direct interest in wireless spectrum. Accordingly, we, together with our partners in the Sprint Nextel joint venture, are planning to file a short form application at the FCC to participate in an auction of advanced wireless service spectrum, which will start on June 29,” Time Warner Cable stated. “The filing of this application does not obligate Time Warner Cable or other companies to bid in the auction, but it provides us the flexibility to take part should we decide it makes business sense to do so.”
The AWS short-form application filing deadline is today. A stronger indicator of the ultimate field of AWS applicants will come June 1 when upfront payments for Auction 66 are due.
Last November, Sprint Nextel and four cable companies—Time Warner, Comcast Corp., Cox Communications and Advance/Newhouse Communications—announced their partnership to offer wireless services bundled with cable television, telephone and Internet service. Sprint Nextel and its affiliates serve more than 45 million customers, while the four cable TV companies combined provide service to more than 41 million subscribers.
“We are not going to be considered a telecom carrier. We are going to be considered a company that knows what media services are about,” Sprint Nextel Chief Executive Officer Gary Forsee said at the time.
Cable TV operators, for their part, are anxious to add wireless service to their bundled offerings to remain competitive with large Bell telephone companies. Wireline giants, which want to add video to their package of high-speed Internet, telephone and wireless services, dominate the U.S. mobile phone market.
Time Warner and Sprint Nextel said they are pleased with the partnership so far, and will conduct early market tests later this year.
“If Sprint does not register, too, then it is possible it and its cable friends can maintain active discussions during the AWS auction that could lead to further investment in the joint venture with cable inclusive of [Sprint Nextel’s] huge greenfields 2.5 GHz spectrum position,” said Jim Wiesenberg, a wireless licensee and principal of WW Associates, a spectrum-oriented advisory firm.
It turns out Sprint Nextel has decided against bidding on its own at the AWS auction. “Sprint Nextel is not filing an individual short form to participate in the AWS auction,” said Leigh Horner, a Sprint Nextel spokeswoman.
Sprint Nextel is seen by many analysts as having a strong spectrum position, and following Sprint Corp.’s acquisition of Nextel Communications Inc. last year is set to pick up 10 megahertz of spectrum in the 1.9 GHz band as part of Nextel’s rebanding efforts.
Sprint Nextel is not the only carrier that will forgo the AWS auction. At a conference in Palm Springs, Calif., an Alltel Corp. executive on Tuesday said the Little Rock, Ark.-based mobile phone carrier will not participate in the upcoming AWS auction.
“We’re going to take a pass on that,” said Kevin Beebe, Alltel group president for operations, in response to a question at a meeting of the Rural Cellular Association.
Beebe said that Alltel “didn’t like the split nature” of the 1.7/2.1 GHz paired spectrum bands that will be on the auction block, and that the company believed that there would be “cost challenges” associated with building a green-field network with that spectrum. He went on to say that the way the Federal Communications Commission is poised to sell the spectrum—through blind bidding—also wasn’t to Alltel’s liking.
The Congressional Budge Office estimates the AWS and some smaller auctions could raise $15 billion for the U.S. Treasury. It is unclear whether recent rule changes on blind bidding and small-business bidding discount eligibility—as well as one and possibly additional AWS-related suits—could lower CBO’s revenue projection.
“We have not been advocates of blind bidding rules,” Beebe said. He gave the example that if Alltel was considering buying more spectrum to bolster its operations in Arizona, the company would want to know if other CDMA operators were buying significant amounts of spectrum in nearby markets, such as San Diego, where Arizona customers would commonly roam.
However, another regional CDMA carrier, Leap Wireless International Inc., is bullish about the upcoming AWS auction.
“Based on our evaluation, we believe that the spectrum available in this auction presents attractive prospects for expansion that provide good return potential for the business and, ultimately, our stockholders. Therefore, we plan to participate in the auction, and may do so directly and with third parties, while continuing with the focused strategy and disciplined approach to acquisition we have demonstrated in the past,” said Doug Hutcheson, chief executive officer and president of Leap. “The company intends to take the necessary steps to obtain the liquidity needed to support our participation and we expect to raise funds for the purchase of spectrum in the auction through a mix of completed, committed and contingent capital. We believe that this funding strategy will put the company in a good position to participate in the auction and finance purchases of properties that are attractive to the business to the degree that they are priced at levels consistent with our desired return thresholds.”
Other major mobile phone carriers either could not be immediately be reached for comment or declined to say whether they are filing short-form AWS applications today.
RCR Wireless News reporter Kelly Hill, in Palm Springs, contributed to this report.
