WASHINGTON-Are the prices being paid for C-block broadband personal communications services licenses getting to be too rich for even the richest blood? If the recent exit of U.S. AirWaves Holdings Inc., PersonalConnect Communications Inc. and TeleCorp. Inc., is any indication, second-squad bidders should get ready to come up with the cash for major and middle-tier markets as more varsity-team players take themselves out of the game.
“This decision was made in consultations with our strategic-alliance partners and investors when the prices in the markets where U.S. AirWaves was bidding reached a level we determined was unacceptable, given our operating experience and business strategy,” explained the company’s President and Chief Executive Officer John DeFeo. “We do not believe the prices in the large, high-quality markets we targeted are now economically viable to produce the appropriate returns. We have a responsibility to our best-in-class partners and investors not to pursue licenses beyond spectrum acquisition cost limits established in our original business plans,” he added.
DeFeo, who has declined to grant interviews during the course of the auction, said his company would be looking into other PCS-related opportunities, including management contracts and/or joint ventures with new licensees. The company has asked the Federal Communications Commission to return its auction down payment.
Thomas Sullivan, representing Telecorp., which zeroed out during Round 32, agreed with DeFeo. “Prices got too high, and things got crazy,” he told RCR. “We probably would have stayed in the auction, but prices surged too much.” Atlanta had been TeleCorp.’s last big holding.
Sullivan added that TeleCorp.’s equity partners still were interested in participating in the PCS industry, but that the methodology hadn’t been decided. “There will be a lot of road kill,” Sullivan said.
PersonalConnect, in which cellular mogul turned enhanced specialized mobile radio entrepreneur Craig McCaw held a 20 percent investment option, has released no statement. Company head Tom Alberg, a former McCaw employee, did not return phone calls.
Following the close of Round 32, net revenues for the C-block channels totaled $6.8 billion. In light of such economic developments, wireless watchers are speculating on who will be next.
BIA Consulting Inc. in Chantilly, Va., which has been analyzing the auction round by round, names the following markets as being the most expensive so far in dollar amounts: New York City; Los Angeles; Chicago; Philadelphia/Wilmington, Del./Trenton, N.J.; San Francisco/Oakland/San Jose; Dallas/Fort Worth; Washington, D.C.; Houston; Boston; and Miami/Fort Lauderdale. The most recent bid for the New York market alone accounts for 10 percent of the total net dollar bids placed on all markets.
According to Washington, D.C.-based analyst Taylor T. Simmons, the number of bidders in the C-block PCS auction has been reduced from an original 255 to 165 that are active on at least one BTA as of Round 31. Simmons is keeping an eye on DCR PCS Inc., GO Telecommunications Corp. and PCS 2000 L.P.
“[Although] DCR placed no new bids in Round 31, I seriously doubt they are getting out,” Simmons said. “They might be thinking that this could save them money, in that for each round that they don’t bid between now and the end of the auction, the prices will go up that much less overall.
“This assumes that some bidding wars can be avoided simply by waiting until your erstwhile competition uses up all their money elsewhere, scales back or gives up entirely,” he added. Indeed, DCR did “wake up” again in Round 32 and continues to be alive.
High-roller PCS 2000 declined to bid on two rounds last week, and it has three waivers left. However, it began bidding again in Round 32.
GO Communications has reduced its bidding eligibility from an original 100 million pops to 34 million; the company has not, however, used any of its bidding waivers so far. “Although it might make some sense, I doubt that GO will take a cue from DCR and lay off bidding,” Simmons said. “They probably fear this would send the wrong signal to the competition and invite them to invade their markets-but this is happening, anyway.” GO may be planning its second assault on the Boston market, on which NextWave Personal Communications held the high bid as of Round 31.
NextWave Personal Communications appeared to be riding a high wave last week, placing top bids for San Diego, Los Angeles and New York City; and beating out North Coast Mobile Communications Inc., for the latter market in Round 31. As of that round, NextWave held such other major markets as Washington, D.C., Atlanta, Baltimore, Portland, Las Vegas and Cleveland/Akron.
North Coast Mobile is another company worth watching. Its principal, John Dolan, is the nephew of CableVision’s Charles Dolan, and the New York City market that Dolan has been chasing could be a complement to CableVision’s operation in Woodbury, Long Island.
Washington PCS, reportedly backed by American Personal Communications, took two rounds off and then reduced its eligibility from 3 million pops to 2 million. It is stalking the Richmond and Lynchburg, Va., markets that are contiguous to the Washington/Baltimore corridor that APC currently is serving.
There has not been as much excitement in the 900 MHz specialized mobile radio auctions, with the top five contenders remaining the same since the auctions began almost 60 rounds ago-Paging Network of America Inc., FCI 900 Inc., Motorola SMR Inc., Geotek Communications Inc. and Fleet Call Inc.
As of Round 58 net revenues gained (exclusive of withdrawal payments) is $134.2 million. The most active markets last week were New Orleans, Detroit, Charlotte, N.C., Miami, San Antonio, Texas, New York, Dallas, Chicago and Atlanta.
