After some doubt that bidding interest would be sufficient to bring the FCC's broadcast incentive spectrum auction to a close, FCC Chairman Tom Wheeler has confirmed the threshold was hit today.
That means with requirements satisfied ($17.65B in net proceeds as of round 2), the forward auction will conclude in the current stage (Stage 4).
Bidding will go on (resuming at 10 a.m. tomorrow) until there's no excess demand in any of the markets, and it will be followed by an assignment phases where winning wireless bidders can bid for specific blocks of spectrum.
The benefits of running an incentive auction are "indisputable," Wheeler says: "We will repurpose 70 MHz of high-value, completely clear low-band spectrum for mobile broadband on a nationwide basis.
"On top of that, 14 MHz of new unlicensed spectrum -– the test bed for wireless innovation -– will be available for consumer devices and new services. The auction will provide $10.05 billion to broadcast television licensees who participated and billions towards deficit reduction."
The FCC's broadcast incentive wireless spectrum auction is winding to a close -- and it's a less ambitious close than expected, as the agency has been lowering the price and size of the sale with bidders in short supply.
The agency will now pay no more than $10B for some local broadcast licenses. That's vs. a reverse auction price set at $86.4B by the FCC last summer. So the auction may be successful in repacking spectrum for better use, but broadcasters hoping for a windfall might end up sorely disappointed.
“It’s simple: The broadcasters showed up, and the carriers didn’t,” says TV station rep Preston Padden.
Today brings a fourth round of bidding, but if demand doesn't match license supply (as it hasn't recently), the round could last just a few hours. Conversely, bidders who have been hiding their cards may act, with the prospect that the forward auction could close in this round.
The last round of bidding ended with $19.7B in bids, about half of what the FCC needs to close the sale.
When it comes to suitors for T-Mobile (TMUS -0.2%) -- linked by analysts to some increasing deal talk to come with the end of the FCC's spectrum auction -- nobody may be a match for a SoftBank-backed Sprint (S +0.5%), New Street Research says.
That deal would still be challenging, though, as debt-heavy SoftBank (OTCPK:SFTBY -1.7%) would need a lot of cash, and T-Mobile's value has only gotten higher -- about $48B after shares ran up nearly 50% in 2016.
But that cash could provide a "knockout" bid of $69B (including $22B in equity) outside of synergies, according to analyst Jonathan Chaplin.
That's a bid that a cableco like Comcast (CMCSA -0.3%) or Charter (CHTR +2.6%) or even Dish Network (DISH -0.2%) would have trouble matching, though T-Mobile owner Deutsche Telekom (OTCQX:DTEGY +0.4%) might prefer that kind of buyer to Sprint. "In this scenario, we assume an offer price of $80 per share," said Chaplin; that's a 40% premium to T-Mobile's closing price today.
Macquarie is staying bullish on AT&T (T -2.1%), Sprint (S -0.5%) and Charter (CHTR +0.6%) after hearing 5G strategies from the multitude of companies presenting at the Consumer Electronics Show.
Charter's confidence in its platform was the biggest surprise, Amy Yong and team write: "With or without wireless owner economics, its standalone fiber-rich platform translates well in a 5G world. Charter has one of the largest fiber footprints and has committed to further expand it through all-fiber buildouts to 2M homes over the next five years."
That infrastructure will let them hit 10Gbps symmetrical speeds similar to 5G, Yong writes, and by 2018, wireless services will be offered using its MVNO agreement with Verizon. The firm boosted its price target to $317 (15.5 times estimated 2017 free cash flow/share), implying 6.4% upside.
Meanwhile, despite the end of promo pricing for DirecTV Now, AT&T could add "1M-plus subs in no time." Zero rating could reinvigorate wireless despite the less appealing price points. Macquarie boosted that price target to $48 (7.25 times estimated 2018 EBITDA), implying 16% upside.
As for Sprint, they stay Outperform-rated with a price target of $10.25, implying 17% upside. The company should see a stronger 5G position due to 204 MHz of spectrum and HPUE optimization technology, which should increase 2.5-GHz band coverage by 30% or more.
At its "Un-carrier Next" event, T-Mobile (TMUS -2%) revealed that it will market and sell just one unlimited plan starting Jan. 22.
The T-Mobile One All-In plan will roll taxes and fees together so the plan is sold at one price that's not planned to change.
Despite the unlimited-data nature, T-Mobile is also offering a "KickBack" feature that pays back to lightly-used data plans. Lines that don't use more than 2 GB of data in a month will get up to $10 in bill credit on the next month's bill -- a major-provider move not dissimilar to the "buy-what-you-use" plans at Google's Project Fi.
In a series of New Year prognostications, Legere predicted Dish Network (DISH +0.9%) would "die" this year (possibly via merger) and that three of the four wireless chiefs would change during the year. He had little to say about a Sprint (NYSE:S) merger but "It's pretty clear that Sprint needs to do something ... Sprint themselves is like an 'exploding plan' " (referring to promotional wireless plans).
He added that "two of the most hated companies in the world" will talk about coming together as "the ultimate evil corporation of all time."
"Vericast or Comizon, I don't know," Legere said (VZ, CMCSA). "If you combine the two most hated companies in America, you get the No. 1 most hated company," he added. "Talk about synergies."
"I was just called by the head people at Sprint and they're going to be bringing 5,000 jobs back to the U.S.," President-elect Trump told reporters outside Mar-a-Lago, adding that another 3,000 U.S. jobs would be created at OneWeb.
But Sprint (NYSE:S) spokesman Dave Tovar clarified that the positions were part of a previously disclosed pledge by parent company SoftBank (OTCPK:SFTBY), which promised to create 50,000 American jobs - still quite an impressive number - after meeting with Trump earlier this month.
In what he had teased as a "positive" economic announcement for late today, President-elect Donald Trump said that Sprint (NYSE:S) would be bringing 5,000 jobs back to the U.S., and that OneWeb would create 3,000 jobs.
That's thanks to SoftBank (OTCPK:SFTBY) chief Masayoshi Son, Trump says, and "because of what's happening and the spirit and the hope." SoftBank owns about 80% of Sprint, and has about 40% of OneWeb.
Privately held OneWeb started up with backing from Richard Branson and Qualcomm with a goal to build a network of hundreds of low-orbit satellites to spread fast Internet around the globe.
Could Sprint-friendliness mean the administration would take a sunny view of a potential merger between Sprint and T-Mobile (NASDAQ:TMUS)?
Updated: Sprint's statement says it expects to fill the 5,000 jobs by the end of fiscal 2017. "The company anticipates these jobs will support a variety of functions across the organization including its Customer Care and Sales teams. Sprint will begin discussions immediately with its business partners, states and cities to determine the right locations in the U.S. to create these jobs."
Sprint's been more conservative with promotions compared to rivals in the Big Four, notes analyst Jennifer Fritzsche. The firm has cut its prediction for postpaid net additions to 350,000 from a previous 450,000.
Fritzsche and team also see churn of 1.6% and cut revenue estimates for the fiscal year (to $32.3B from $32.5B, vs. consensus for $32.72B) as well as EPS estimates (to -$0.24 from -$0.20, vs. consensus for -$0.23).
“The competitive environment in the last three weeks of December saw a dramatic pick up in promotions,” Fritzsche writes. “While S engaged in some promos, it has taken a more conservative stance for the most part, and was the only one of the 4 national wireless players not to offer a free iPhone over Thanksgiving weekend.”
Sprint's still the "most interesting" wireless stock and Wells is staying bullish overall.
"We're definitely moving in the right direction," says Sprint (S +2.4%) chief Marcelo Claure about heading toward the midpoint of a five-year turnaround plan. "We run it like a big start-up."
Claure spent Saturday on the sales floor of one of the company's newest locations, working to prove he's "still got it when it comes to sales."
“It’s very quick decision making, no bureaucracy, try new things, don’t be scared to fail and dream big,” he tells the Kansas City Business Journal. “All the basics that you apply to entrepreneurs and a start-up, we apply to the Sprint re-startup.”
The biggest milestones the company's hit so far? Slashing costs by $4B, getting back to positive operating income and free cash flow, and surpassing rivals AT&T and Verizon in net adds.
Most Note 7s have been exchanged or refunded, but Samsung -- concerned about safety hazards after wide reports of battery fires -- said it would begin distributing an update to kill the phones.
The other carriers in the Big Four (T, S, TMUS) agreed to send the update, and Verizon initially held out citing not wanting to leave its customers hanging without emergency communication -- but has now acceded, and will distribute the kill switch on Jan. 5.
Sprint (S +1%) is targeting 2017 to bring its users gigabit wireless data speeds, a hundredfold increase over competition, through three recent wireless technologies.
The company's hoping that the move will further capitalize its leading position in 2.5-GHz spectrum, high-frequency airwaves it's been planning for years to tap for network speeds.
The new move is High Performance User Equipment, which the company demonstrated this afternoon. The technology is capable of extending the 2.5-GHz coverage by up to 30% (matching midband performance), notably including indoors where most traffic is generated (but high-frequency waves have trouble reaching).
That will be combined with carrier aggregation and massive multiple input-multiple output (MIMO) tech to pursue the gigabit milestone.
Most of the company's phones should begin supporting the new technologies early next year, with Samsung as a key partner, though iPhone support is yet to be determined.
If a changing presidential administration finally makes for a Sprint/T-Mobile merger, it won't be cheap, says Wells Fargo's Jennifer Fritzsche.
Sprint (S +0.5%) might have to open up its wallet to the tune of $90B-plus in such a deal, she writes -- which could mean that even in an amenable regulatory environment, the cost may be too high.
T-Mobile's (TMUS +1.6%) likely price is around $93.4B, she says, 8.5 times estimated EBITDA for fiscal 2017. That accounts for a 28% premium to T-Mobile equity and Sprint assuming $33B in T-Mobile net debt.
The two could save by cutting jobs and ad/marketing budgets along with consolidating billing systems, and line up spectrum portfolios in an optimal fashion. But even in Trumpworld there may be resistance to a three-carrier universe.
“Interestingly, Sprint/T-Mobile would have more total subscribers than Verizon and nearly as many as AT&T,” Fritzsche says in her note. “In fact, this may be one of the largest impediments to a deal being approved—the industry would become even more concentrated, with T-Mobile/Sprint having a dominant competitive position among ‘value’ postpaid and prepaid subscribers.”
Sprint (S +7.2%) is partnering with Niantic to turn its more than 10.5K U.S. locations into PokeStops and Gyms, beginning Dec. 12.
As for sector consolidation, yesterday's meeting between Softbank's chief and Trump, and Softbank's (OTCPK:SFTBY +5.7%) promised $50B U.S. investment could foreshadow a Sprint/T-Mobile (TMUS +3.9%) merger, says Oppenheimer's Tim Horan.
The objective of a tie-up between the two, says Horan, would be "quad-play offering" to attack cable's "triple-play." T-Mobile, he says, is the "king maker" in the process thanks to its combined spectrum portfolio.
Look for Comcast (CMCSA +0.6%) or Charter (CHTR +3%) to make competing bids, but they'd have to be big numbers to win out over Sprint.
Sprint (NYSE:S) [83% owned by SoftBank Group], trading negative for the majority of the day, has moved sharply into positive territory on the development, while SoftBank (OTCPK:SFTBY) shares are steadily elevating as well to 1.9% gains.
After hanging near 52-week lows, Globalstar (NASDAQ:GSAT) has moved up 8.9% after an FCC ex parte filing indicates support from Sprint (S -1.4%) for a revised proposal covering Globalstar's Terrestrial Low-Power Service.
The two companies jointly urged the FCC to adopt the revised plan for TLPS in Globalstar's licensed spectrum at 2483.5-2495 MHz, which features a revised out-of-band emissions limit.
The revisions came amid concerns that TLPS might raise interference issues for providers like Sprint. "In the event that its low-power terrestrial operations at 2483.5-2495 MHz causes harmful interference to BRS or EBS systems above 2496 MHz, Globalstar will meet its absolute obligation as an ancillary terrestrial component licensee to mitigate and resolve such interference," the filing says.
"Low-power terrestrial use of this band will expand the nation’s broadband spectrum supply and should improve the quality of wireless broadband for American consumers," the filing notes.
Conversations about Sprint (S +3.2%) and T-Mobile (TMUS +1%) getting together in a merger, to combine their struggles against the top two wireless providers, are running into one problem, according to Citi: The two upstarts aren't struggling as much as before.
Operational rebounds at Sprint and T-Mobile will make for a harder case before regulators who would have to be persuaded to sign off, the firm says. An attempt to merge in 2014 was denied by authorities.
"We think Sprint and T-Mobile are more likely than not to reconsider a merger scenario, but the (TV spectrum) auction, other strategic options, and regulatory complexities may slow down any attempt during 2017," writes analyst Michael Rollins.
T-Mobile led the big four carriers with 851,000 net adds in branded postpaid phones, and added 684,000 net subs in branded prepaid to boot. Sprint, meanwhile, added 347,000 net postpaid phone subs in a rebound quarter.
"We come back to an essential issue that we believe hurt the companies' prospects for consolidation in the last go-around -- if it's not broken, why fix it?" Rollins says.