CBS CEO Leslie Moonves reiterated that the broadcasting giant is open to selling off some of its spectrum in the FCC's 600 MHz incentive auction, a move analysts think could fetch $2 billion or so.
"Regarding the spectrum obviously it's something that we are looking at and we are interested in it," Moonves said during the company's fourth-quarter earnings conference call, according to a Seeking Alpha transcript.
According to a research note from Jefferies analysts John Janedis, Jaime Morris, Michael Russo and Brian Paturzo, CBS selling off spectrum remains a distinct possibility. In October 2014, "we highlighted the potential for CBS to sell its spectrum in duopoly markets. It has become clear that is a viable option, in our view," they wrote. "While the timing of the auction is unknown and at earliest will likely not occur until '16, a sale of spectrum could result in $2B of proceeds."
FCC officials started hitting the road this week to educate and woo broadcasters about participating in the incentive auction, which is scheduled to start in early 2016. Getting broadcasters support is crucial since their participation is voluntary.
If the FCC could get large broadcasters like CBS and Fox to give up their spectrum it might push others to do so as well. However, each broadcaster is likely to make a decision based on its own business interests and prospects for how much money it might get for its spectrum, which will vary by market.
This is not the first time that Moonves has indicated he would be willing to part with airwaves, especially in markets where the broadcaster has a lot. "Spectrum presents a very great opportunity for us," Moonves said at an investor conference in December, according to the Los Angeles Times "We own 27 television stations--13 are CBS and the rest are CW or independents. When you see the numbers being thrown out there for the spectrum of a local television station--in the $200-million range--suddenly that looks pretty attractive to a CW duopoly," Moonves said, referring to markets where CBS owns two stations.
21st Century Fox co-COO James Murdoch also indicated at that conference Fox might sell spectrum. "If it makes sense to broadcast [only] over wires, then we'll do it," he said, according to the LA Times. "But right now there are too many unknowns."
According to a recent FCC filing, representatives from Fox Television Stations, ION Media Networks, Univision Communications and Tribune Media Company met with FCC Chairman Tom Wheeler earlier this month to express their support for the incentive auction. However, the broadcasters said they want more clarity from the FCC on a number of issues, including greater flexibility on channel sharing. The broadcasters also want the FCC to set a target of getting at least 126 MHz of spectrum from broadcasters for the auction.
Last week the FCC released estimates for opening bids for broadcasters' 600 MHz spectrum in the agency's planned incentive auction of those airwaves. However, since the FCC's formula for calculating the opening bid prices does not take into account the prices paid in the AWS-3 spectrum auction, the figures have been criticized as undervaluing the spectrum.
Preston Padden, who leads a group of broadcasters called Expanding Opportunities for Broadcasters Coalition, said the FCC isn't valuing broadcasters' spectrum correctly because the agency's spectrum valuation formula was created before the close of the AWS-3 auction and doesn't take into account the prices paid in the auction. The auction, which ended Jan. 29, had net winning bids of around $41.3 billion, double what many analysts had expected before the auction started. Padden argued that the AWS-3 auction demonstrates how much carriers are willing to pay for spectrum.
The FCC's formula for opening bids in the 600 MHz auction "grossly undervalues [broadcasters'] spectrum," Padden told the Wall Street Journal. The FCC has declined to comment on his remarks.
For more:
- see this Seeking Alpha transcript
- see this LA Times article
- see this Broadcasting & Cable article
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