AT&T Mobility (NYSE: T) CEO Glenn Lurie said he does not think that next year's incentive auction of 600 MHz broadcast TV spectrum can possibly raise $60 billion, as some analysts have speculated it might.
Speaking yesterday at Re/code's Code Mobile conference, Lurie dismissed as "unrealistic" projections that the auction could raise that much revenue. The FCC has not forecasted that figure, though the agency mentioned in a footnote to the auction rules it issued in August that the Expanding Opportunities for Broadcasters Coalition, a group of 87 member TV stations that was formed to help shape auction rules that favored TV broadcasters, thinks the auction could raise $60 billion to $80 billion.
Analysts at Moody's Investors Service said in a report last month that incentive auction revenues "could approach $60 billion if non-traditional bidders -- cable MSOs and technology companies, such as Comcast, Dish Network, and Google -- decide to participate." A Dish Network (NASDAQ: DISH) executive said this week the satellite firm may participate but is still evaluating the auction rules and its options.
That $60 billion total matches a similar figure from Kagan Media Appraisals, which issued a report earlier this year predicting that the auction could raise between $60 billion and $80 billion in value, depending on the amount of spectrum that is released to bidders.
Wall Street research firm Barclays issued a report last month largely agreeing with the $60 billion figure. However, the firm pointed out that the total amount of spectrum released in the AWS-3 auction, 65 MHz, will be less than the 84-100 MHz of broadcast spectrum that is expected to be made available through next year's 600 MHz incentive auction. Further, Barclays also pointed out that the average value of spectrum in the 600 MHz incentive auction is expected to be around $2.50/MHz-POP, which would be lower than the $2.72/MHz-POP generated from the AWS-3 auction.
Lurie thinks those estimates are off base. "I think the government's thrown out $60 billion of opportunity. We don't think that's realistic," he said at the conference. "We just don't think that's possible."
Why is Lurie skeptical? He noted that Sprint (NYSE: S) "has made a decision not to participate," which he presumably thinks will depress revenue. Sprint said late last month that it "has concluded that its rich spectrum holdings are sufficient to provide its current and future customers great network coverage and be able to provide the consistent reliability, capacity, and speed that its customers demand," and would not participate in the auction.
T-Mobile (NYSE:TMUS) CFO Braxton Carter said at an investor conference last month the carrier might have as much as $10 billion it could spend on spectrum during the incentive auction. However, he said that he doesn't think T-Mobile will need to spend that much to obtain the spectrum it wants.
Lurie seemed to agree with him. "The FCC's put in some rules that I think are interesting when you consider that T-Mobile came out recently and said, well we'll spend up to $10 billion," he said. "Well, with Sprint not participating, I'm not sure they're going to have to."
Carter said T-Mobile is well positioned to participate in the auction, and that he expects "robust" action from a variety of bidders, including potentially bidders from outside the wireless industry.
Verizon Communications (NYSE: VZ) CFO Fran Shammo said in July that acquiring more low-band spectrum is "not a great need" the company needs to fulfill. However, it's unclear how much Verizon will participate in the auction.
Lurie touched on other topics during his appearance at the conference and reiterated a common theme for him and AT&T: that the carrier wants to help connect everything, from cars, to watches to appliances inside homes. As smartphone adoption slows down, AT&T is looking to the connected car, home and the Internet of Things with enterprise customers to spur new cellular connections -- and revenue growth. However, Lurie said AT&T is weighing different pricing options so that each new, incremental device a customer adds to a shared data plan will not automatically add $10 to their monthly wireless bill.
"We'll have to have multiple situations and price points," he said. "There may be situations where it eats out of the same [data] bucket. … We'll have to work through that based on customer demand."
Lurie also reiterated his belief that smart watches will need to have their own cellular connections to be truly valuable to users. "When you're thinking about trying to solve real problems, I think the device [smartwatch] has to be connected," he said, according to CNET.
In a veiled barb at T-Mobile CEO John Legere, who is a prolific Twitter user, Lurie responded this way when asked why he doesn't tweet more, according to VentureBeat: "I don't think [being an avid tweeter is] a pre-requisite for being a good CEO in the mobile business."
- see these two separate Re/code articles
- see this VentureBeat article
- see this CNET article
Analysts: 600 MHz incentive auction could generate $60 billion, but per-MHz prices could be lower than AWS-3 auction
T-Mobile CFO on 600 MHz incentive auction: 'Dynamics are positive,' carrier could have up to $10B to spend
Analyst: 'Better than expected' participation expected from TV broadcasters in 600 MHz spectrum incentive auction
T-Mobile seen as winner in Sprint's decision to bow out of 600 MHz incentive auction
FCC's Wheeler 'supremely confident' incentive auction will take place in March
AT&T's Lurie outlines new path for industry: Connecting everything