Verizon: Biggest winner or biggest loser?

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Verizon acquired the most licenses, by far, in the auction, but it will take time to clear the spectrum and actually deploy 5G. (Getty Images)

After the FCC released the winners of the C-band auction, Verizon announced it will host its 2021 virtual investor day on March 10. That’s when investment analysts expect to hear the company’s plan for the bevy of C-band licenses it picked up for a cool $45.5 billion. Verizon’s total spend will be more than $53 billion when clearing costs are added to the tally.

That outlay bought Verizon the most spectrum in the auction by far, with 160 MHz nationwide. In the A block, which will be the first block to be made available later this year, it picked up 60 MHz. The other blocks aren’t expected to be available until late 2023.  

In most spectrum auctions, analysts talk about “winners” and “losers,” but in this case, investment analysts are putting those descriptions in question. Oppenheimer analysts downgraded Verizon and AT&T from “Outperform” to “Perform,” mainly on valuation, and said they believe both bid aggressively to catch up with T-Mobile’s 5G network quality.

“In the common terminology of auctions, the highest bidders are invariably referred to as ‘winners.’ In the case of the C-Band auction, however, where the total bill climbed to $94B, the notion that those who bought the most are somehow ‘winners’ is a bit hard to swallow,” wrote MoffettNathanson’s Craig Moffett in a note for investors.

“Verizon is the most negatively impacted here. Their balance sheet wasn’t as weak as AT&T’s going in, and their business mix is healthier, but they emerge after the $45.5B of auction spend even more levered than AT&T. Assuming all-debt financing, they’ll be carrying leverage of 4.2x EBITDA(!),” Moffett wrote.

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That said, Verizon came away with what it needed; it will have a contiguous block of no less than 140 MHz in each of the top 50 largest markets and in most, it came away with 160 MHz or more, he noted.

Verizon disclosed in an 8-K filing that it entered into a $25 billion loan agreement to help pay for the licenses. Morgan Stanley analysts, led by Simon Flannery, expect rating agencies, such as Moody’s, to change the outlook for Verizon from “positive” to “stable” and see additional funding needs of around $25 billion to $27 billion in the near term. 

Verizon: Biggest winner or biggest loser?