As expected, AT&T showed up big at the C-band auction and was the second largest spender at $23.4 billion to win 1,621 licenses in the 3.7-3.98 GHz band (AT&T’s Auction 107 bill is still “only” about half that of Verizon’s).
Add in clearing costs and its C-band price tag increases to $27.4 billion, costing $1.12 per MHz/POP, according to LightShed Partners.
The carrier came away with at least 60 MHz in all 406 partial economic areas (PEAs). And scooped up 80 MHz in nearly all of the 50 largest markets, excluding Baltimore-D.C. where it got 60 MHz and Dallas where it obtained 100 MHz, according MoffettNathanson analysis.
AT&T captured more A-block spectrum than expected (anticipated to be cleared sooner and ready for deployment in 2021 versus BC/ABC blocks with clearing deadlines a few years out) winning 40 MHz of the 100 MHz available.
This means AT&T could move faster on C-band deployments.
“AT&T’s willingness to pay up for the early A-block spectrum likely means that it plans on being more aggressive on macro tower spending than we previously thought,” wrote LightShed Wednesday.
But it still mostly focused on BC and ABC blocks, MoffettNathanson noted, buying spectrum “at a lower average cost in return for having to wait longer before the spectrum is delivered.”
C-band winner (?)
Like Verizon, AT&T is largely seen in need of mid-band frequencies to compete in 5G with T-Mobile.
AT&T’s been using a mix of 850 MHz and lower mid-band used for 4G LTE with the help of DSS for 5G coverage. Millimeter wave deployments (mostly at 39 GHz) for its 5G+ service have been limited and largely focused on venues.
New Street Research lands in the camp that carriers couldn’t overspend at C-band, dubbing AT&T (and Verizon) the “big winners” based on auction results. New Street’s Jonathan Chaplin wrote “they have narrowed the gap with T-Mobile (though most of this spectrum is only available in three years; that is a long time to be at a disadvantage.)”
However, not all view AT&T – or the industry overall as winners in the face of a total C-band auction bill that reached $94 billion.
Among several factors, MoffettNathanson also cited how pricey it will be to densify networks for broad C-band coverage.
And AT&T’s debt was already a concern going into the auction. It secured $14.7 billion in a short-term loan credit to pay for some of the spectrum. Down payments (20%) for Auction 107 are due March 10 and final payments (80%) are due March 24.
“[AT&T’s] credit rating is just two notches above junk, and they will very likely be downgraded one notch as a result of their incremental debt for the auction,” wrote Moffett.
To conserve cash MoffettNathason thinks AT&T will need to return to a more cautious approach.
“That will probably mean a less aggressive promotional posture at Mobility, less aggressive spending to feed and promote HBO Max, and less aggressive capital spending not only for wireless network densification but also for wired broadband deployment,” wrote Craig Moffett.
AT&T is holding an investor day on March 12.