T-Mobile Comes Out On Top In FCC Spectrum License Auction

Includes: CMCSA, DTEGY, S, T, TWX, VZ
by: Jonathan Liss

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

FCC License Auction Gets Big Bids

  • Summary: The FCC auctioned more than 1,000 radio-spectrum licenses to provide new wireless services, generating almost $13.9 billion in gross proceeds and handing T-Mobile USA Inc. the capacity it needs to compete with larger rivals. The company, which is a unit of German telecommunications provider Deutsche Telekom AG (DT), was the top bidder, offering almost $4.2 billion for 120 licenses. Verizon Wireless (NYSE:VZ) agreed to pay $2.8 billion for 13 licenses, and a consortium that includes cable operators Comcast Corp. (NASDAQ:CMCSA) and Time Warner Inc. (NYSE:TWX), along with cellular-phone carrier Sprint Nextel Corp. (NYSE:S), agreed to pay almost $2.4 billion for 137 spectrum licenses. Many potential new players were squeezed out of the game before it got going as a result of the high bidding prices. "The dream of new entrants that would shake up the market died," said Roger Entner, an analyst for technology research firm Ovum. "The usual suspects have won." Some smaller carriers were able to expand their coverage from select cities to a much larger area. For example, Leap Wireless International Inc. (LEAP), a smaller, regional company based in San Diego, won 99 licenses, bidding $710 million for airwaves covering cities including Washington, Philadelphia, Baltimore and St. Louis. Until now, T-Mobile lacked the capacity to upgrade its network to run 3G wireless services. The new licenses will put T-Mobile in a more competitive position.
  • Comment on related stocks/ETFs: Barron's weekly had an enlightening piece on the spectrum auction and CMCSA's role in this yet-unexplored market. Barron's looks at some of the possible reasons the U.S.'s biggest cable player is foraying into unchartered territories; in our comments, we look at even more.

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