Analysts divided over how much they believe AT&T, Verizon, T-Mobile and Dish spent in AWS-3 auction

Now that the AWS-3 spectrum auction is officially concluded, with nearly $44.9 billion in provisional winning bids, speculation is beginning in earnest over how much wireless carriers bid for the airwaves--and what will come next.

The auction ended after 341 rounds of bidding. According to analysts at Jefferies and New Street Research, the paired spectrum in the auction (1755-1780 MHz for uplink operations and 2155-2180 MHz for downlink) sold for an average of $2.71 per MHz-POP, well above what analysts had expected before the auction began Nov. 13. The uplink spectrum, the 1695-1710 MHz band, on average sold for much less at an average of 52 cents per MHz-POP.

The paired spectrum in the auction includes the G Block (1755-1760/2155-2160 MHz), H Block (1760-1765/2160-2165 MHz), I Block (1765-1770/2165-2170 MHz), and J Block (1770-1780MHz /2170-2180 MHz). The G Block is licensed in 734 Cellular Market Area (CMA) geographies and the other paired spectrum blocks are licensed in 176 geographically larger Economic Areas (EAs).

The paired spectrum licenses drew by far the largest bids, especially for the 10x10 MHz J Block licenses in major metropolitan areas like New York City, Los Angeles and Chicago. For example, the four paired spectrum blocks in the New York metropolitan areas attracted an aggregate $6.2 billion in bids alone; three paired spectrum blocks in the Los Angeles market (H, I and J) attracted a total of $3.9 billion in bids; and the four paired spectrum blocks in the Chicago area attracted $2.9 billion in bids. Taken together, bids on the paired spectrum for those three markets alone accounted for around $13 billion in bids, or 29 percent of the total amount raised in the auction.

Interestingly, according to a research note from Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata, in the G Block the top 20 markets garnered bids that averaged $4.22 per MHz-POP and the remaining markets averaged $1.41 per MHz-POP.

The big question though is: Who won what? The FCC has kept the identity of bidders anonymous, but should reveal their identities in the next five to 10 business days.

Fully 70 companies and entities were registered to bid for spectrum in the auction, though many companies used the names of other entities to mask their true identity. For example, American AWS-3 Wireless was backed by Dish Network (NASDAQ: DISH); Dish also backed Northstar Wireless and SNR Wireless (and disclosed joint bidding arrangements with them).

Analysts are divided over how much they believe AT&T (NYSE: T), Verizon Wireless (NYSE: VZ), T-Mobile US (NYSE:TMUS and Dish will wind up spending. New Street Research analysts currently think AT&T will spend around $20 billion to $22 billion, and Verizon will spend around $15 billion or $16 billion. In their analysis, AT&T may have bought the entire J Block ($18.2 billion) and parts of the G Block (around $2.6 billion). This would leave Verizon to pick up the H Block ($8.4 billion) and the I Block ($8.4 billion), and T-Mobile to get parts of the G Block ($2.2 billion).

In New Street's scenario, Dish would acquire only the 15 MHz of unpaired uplink spectrum for $2 billion. "This is just a hypothetical; Dish may very well have bought paired spectrum in key markets (we think up to $6 billion) which would lower the amounts acquired by the other carriers," New Street analyst Jonathan Chaplin wrote.

However, analysts at investment banking firm Jefferies forecast that AT&T and Verizon each spent around $15 billion for spectrum at the auction. They think T-Mobile spent around $3 billion in the auction. "Due to T-Mobile's already substantial ownership of mid-band spectrum and balance sheet constraints, we would be surprised if the amount was materially higher," they wrote.

As for Dish, the Jefferies analysts think the company spent around $5 billion in the auction. "Though Dish could spend more in order to drive a higher valuation, we doubt [Dish Chairman Charlie] Ergen would use such a transparent and seemingly unnecessary move," they wrote. "Nonetheless, given the limited supply of mobile spectrum, and ongoing delays with the [600 MHz incentive] auction, this could ultimately prove to be value accreting to Dish (and shareholders)."

The massive amount of money AWS-3 auction bidders paid in the event reflects carriers' desperate need for extra spectrum to handle additional traffic on their networks. However, not all of the licenses will be available to use right away.

The downlink licenses at 2155-2180 MHz will be immediately available for use after licenses are granted, which will likely happen in late February. But licensees may have to coordinate with government users for shared access in the 1755-1780 MHz and 1695-1710 MHz bands as federal government users transition their systems out of those bands. That process, as outlined by the FCC, will likely take time. Indeed, unless an AWS-3 licensee and the relevant federal incumbent users strike an agreement, government entities using the spectrum "are not obligated to entertain formal coordination requests" until nine months after the date of the auction closing public notice, the FCC said.

"With all the buzz about the auction revenues, let's not forget the ultimate purpose of this auction--to make more spectrum available for wireless broadband," FCC Chairman Tom Wheeler wrote in an FCC blog post. "Additional spectrum resources will improve wireless providers' ability to meet capacity and coverage needs across the country. This means better wireless service--faster speeds and greater access-- for consumers."

At a press conference, Wheeler cited an unnamed analyst as saying that the 65 MHz of spectrum released via the auction will spur $16 billion in new capital spending by carriers and others. He added that it will increase the U.S. Gross Domestic Product by $50 billion and will create more than 65,000 new jobs.

For more:
- see this FCC page
- see this FCC blog post 
- see this WSJ article (sub. req.)
- see this The Hill article
- see this Broadcasting & Cable article

Related Articles:
IT'S OVER: FCC's AWS-3 spectrum auction ends at record $44.9B in bids
As AWS-3 auction winds down, attention turns to what happens next
Analysts: Bidding in NYC, LA and Chicago in AWS-3 auction is 94% above average prices
AWS-3 auction inches on, with bids passing $43.7B
FCC moves to next stage of AWS-3 auction as bids climb toward $42B
Analysts: Dish will have leverage over Verizon, AT&T if it scores paired AWS-3 spectrum

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