Sinclair, CBS, Gray voice support for FCC's 600 MHz incentive auction, other TV broadcasters on the fence

Executives from major U.S. TV broadcasters like Sinclair Broadcast Group, CBS and Gray Television said their respective companies will likely participate in the FCC's upcoming incentive auction of TV broadcasters' 600 MHz spectrum -- to varying degrees. And executives from other publicly held TV broadcasting companies said they will take a wait-and-see approach to the event.

Sinclair's Christopher Ripley, CFO of the nation's largest TV broadcaster with around 160 stations, reiterated that the company could make up to $2 billion by selling its spectrum to the FCC for the auction. He added that the company is now in the process of finalizing its auction plans.

"We've hired advisers; we have full nationwide simulation up and running. We have an auction team running 24/7 right now talking to multiple parties on channel shares so we can optimize our outcome," he said on Sinclair's third-quarter earnings conference call, according to a Seeking Alpha transcript of the event. "And as I think most of you know, there are a lot of unknowns that go into the auction including the participation of all the other broadcasters … And I think, in closing, I would say that we expect when we look at the opportunities available to Sinclair, given the breadth of our portfolio over 81 markets now, and the number of multi-station markets that affords us I think an incredible opportunity to participate here and do well."

In his own third-quarter conference call comments, CBS chief Leslie Moonves said his company is also looking into participating in the auction. "We are very aware of the lucrative valuations that are out there in terms of spectrum auction. We are evaluating how we could best participate with some of our 13 non-CBS television stations, while still providing our signal through other outlets. It's clearly a terrific option to have," he said, according to Seeking Alpha.

And executives from Gray Television, which owns and operates TV stations in 45 markets, said the company too will participate in the auction in a "limited" fashion. The company named a pair of markets where it plans to sell spectrum, and executives said the company will keep its options open to potentially sell additional spectrum.

Other TV broadcasters said they too are considering participating in the auction. The CFO of Nexstar Broadcasting Group said during the company's third-quarter earnings conference call that: "We are spending an increasingly greater amount of time on the spectrum auction, looking at various options, looking at the economics of that." And a Meredith executive, Paul Karpowicz, said that "we've really got it down to just four markets where we think there could be a lot of potential. Having said that, as we look at those markets and we've run the numbers and we've done a lot of different analysis, we're going to just watch it very closely."

Broadcasters have until Dec. 18 to let the FCC know whether they are interested in participating in the auction. They don't have to officially commit to the event until March.

The FCC's incentive auction -- described as the most complicated spectrum auction ever attempted -- will take place in two parts. First, TV broadcasters will give up their unwanted spectrum in a "reverse" auction where the FCC will pay them for their spectrum. Then, the FCC will conduct a traditional "forward" auction where wireless carriers and others will bid on that freed spectrum. The FCC is hoping to free up between 80 MHz and 120 MHz of spectrum across the country for bidders -- the final amount will depend on how much spectrum TV broadcasters agree to part with.

Last month, the FCC released the starting prices it will offer to TV broadcasters.

"We continue to believe that companies such as EVC [Entravision Communications], MEG [Media General], and TRCO [Tribune Media Company] are likely to benefit the most from this auction, and that companies such as SBGI [Sinclair] and NXST [Nexstar] may submit applications in specific markets as well as looking at other alternatives for their spectrum footprint," analysts at Evercore said in a note to investors issued before the start of the third-quarter corporate reporting season. "We continue to assume $1.50 average price per MHz-POP as the takeaway price. There continue to be a range of factors that could impact this price, including the prices in major markets, prices in adjacent markets, and a potential lack of demand in many of the 400+ plus PEAs (Partial Economic Areas)."

T-Mobile US, Verizon, AT&T and possibly companies like Dish Network and Comcast may participate in the "forward" portion of the FCC's auction.

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