The US Federal Communications Commission (hereinafter referred to as “FCC”) is conducting an auction of wireless licenses. After three weeks of bidding, more than 69.8 billion U.S. dollars of licenses have been sold, setting a historical record. It may change the prospects of mobile phone operators in the next ten years.
The revenue from this auction has surpassed the $44.9 billion record set by the FCC when it auctioned mid-band licenses in 2015 when US mobile phone operators scrambled for such licenses to enhance their 4G services. Today, these companies are investing tens of billions of dollars to pave the way for the construction of next-generation 5G networks. 5G networks will speed up the flow of data to mobile phones and other wireless devices, such as PCs, automobiles, and industrial machinery.
The US$69.8 billion has exceeded Wall Street’s highest expectations, which shows that several companies are competing for the most valuable wireless license. The auction of 5G licenses started on December 8, and will be suspended during the Christmas holidays and New Years’. It will not restart until January 4 next year, when the total amount may rise further.
Until the auction process is over, every bid is confidential. Analysts predict that incumbent companies such as AT&T and Verizon Communications will take away a large portion of their licenses in order to compete with rival T-Mobile America, which acquired Sprint’s assets in February this year.
Walt Piecyk, a telecommunications analyst at research firm LightShed Partners, said: “Mid-band spectrum in the direction of 5G.” He added that the merger of T-Mobile America and Sprint “obviously gives Verizon and AT&T a Coming under pressure”, forcing it to invest a lot of money in bidding for 5G licenses. He pointed out: “When the number becomes so large, there is reason to guess that all companies are becoming more aggressive.”
At the same time, mobile service providers also need to face competition from investment companies and market newcomers. Satellite service provider Dish Network won many licenses in the 2015 auction, and the company issued US$2 billion in convertible bonds this month to raise more cash for the auction. Dish Network previously acquired a part of Sprint’s assets and obtained about 8 million customers from it, and is currently building its own mobile phone network.
On the other hand, wired Internet service providers have been conducting wireless service trials for many years, and their participation may also affect the auction results. Earlier this year, Comcast and Charter Communications spent nearly $1 billion to participate in a smaller license auction, and this time they also jointly participated in the bidding.
The competition in this auction is so fierce that it will bring a windfall to the US Treasury Department. After the license is taken, the winning bidder will need to spend at least another 13 billion US dollars to help a group of satellite companies that are already using these frequency bands to modify equipment.
Wall Street investment bank Raymond James analyst Frank Louthan (Frank Louthan) said that given the low borrowing costs and relatively stable service revenues of mobile phone operators, they are able to afford large expenses. He pointed out: “Investors regard these companies as the safest ones. I don’t think a slight change in the debt ratio will make much difference.”
The FCC will not announce the winning bidder until a few days after the auction ends, which means that the telecommunications industry may not reveal its suspense until February next year.
(Source)
