U.S. Mobile Spectrum Prices Quadruple Since 2006
|source: Wall Street Journal|
The price per MHzPop is derived by multiplying the number of available megahertz of bandwidth covered by a license by the number of people in the area covered by the license.
If a license of 15.0 MHz reached a million people, with a bid price of $11.4 million, the price per MHzPop is $11,400,000 divided by (1,000,000 people x 15 MHz), or 76 cents per MHzPop.
To put the current bids into perspective, the $34 billion staked so far represents about a year’s worth of capital investment by AT&T Mobility, Verizon Wireless, T-Mobile US and Sprint, put together.
So far, one can only speculate about why prices have been so robust, as the identities of bidders are secret.
Most had expected more modest prices, as AT&T and Verizon were expected to be the leading buyers, while Sprint said it would not bid at all, and T-Mobile US had particular needs in Chicago, but arguably could afford not to engage in a bidding war elsewhere.
Most speculation centers on the presence of a third unexpected bidder in the major markets, however.
Beyond that possibility, the robustness of the bids might indicate concern about the timing of anticipated auctions of TV spectrum, or the amount of capacity that might be made available.
There are other ways to acquire spectrum, but some of those paths are closed to AT&T and Verizon. Since it appears impossible for either firm to acquire Sprint or T-Mobile US, buying another mobile company, to get its spectrum, is off the table.
There might be some small opportunities for either AT&T or Verizon to acquire regional assets, but nothing that immediately adds national scale, with a few exceptions. Dish Network has more than 50 MHz that could be sold, if Dish does not decide to move ahead and become a mobile service provider in its own right.
There are some other potential assets (Lightsquared and Globalstar), plus possible future shared spectrum assets that are likely to be made available, but none are available as immediately or are as useful, as the AWS-3 spectrum, one might argue.
|Source: Daily Wireless|
Most observers think a purchase of Dish Network spectrum by AT&T or Verizon would not be blocked, but it is unclear whether Dish would sell at a price either firm might be willing to pay.
For AT&T and Verizon, the most certain path is to acquire spectrum now, as the other options are uncertain.
Also, Dish Network has a vested interest in pushing for high AWS-3 auction prices because higher prices will enhance the valuation of similar assets Dish purchased earlier in 2014, boosting Dish equity value.
If there is uncertainty about the amount of new capacity made available by future auctions, or its possible availability, bidding now in the only certain auction might take on more importance.