FCC wireless auction raises almost $13.9 bln
Last Update: 5:13 PM ET Sep 18, 2006
(Adds quote in third paragraph and details about Verizon in sixth and
seventh paragraphs.)
WASHINGTON (MarketWatch) -- The Federal Communications Commission on
Monday wrapped up an auction of 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.
T-Mobile, a unit of Deutsche Telekom AG (DT), was the top bidder,
bidding almost $4.2 billion for 120 licenses. Verizon Wireless agreed to
pay $2.8 billion for 13 licenses. A consortium that includes cable
giants Comcast Corp. (CMCSA, CMCSK) and Time Warner Inc. (TWX), along
with Sprint Nextel Corp. (S), agreed to pay almost $2.4 billion for 137
licenses. As a result of their aggressive early moves, many potential
new players were squeezed out of the game before it got going.
"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."
The last time an FCC auction drew more bidding was in 2001, when
regulators reauctioned some licenses they had repossessed from NextWave
Telecom Inc. But in 2003, the Supreme Court ruled that the FCC had
improperly reclaimed the licenses, returning control to NextWave and
invalidating the auction.
This time, T-Mobile had the most at stake. Although it is the
fourth-largest U.S. wireless carrier, it has lacked the capacity to
upgrade its network to run third-generation, or 3-G services. The new
licenses will put T-Mobile in a more competitive position.
Verizon Wireless, meanwhile, will likely sit on its spectrum. The No. 2
wireless carrier, a joint venture between Verizon Communications (VZ)
and Vodafone Group Plc (VOD), has a next-generation network called
Evolution-Data Optimized, or EV-DO. It doesn't need to use the new
spectrum for that network. Verizon Wireless is seen using the spectrum
for wireless technology that is further down the line, although it's
unclear what that technology may be.
A spokesman for Verizon Wireless wasn't immediately available for comment.
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, won 99 licenses, bidding $710
million for airwaves covering cities including Washington D.C.,
Philadelphia, Baltimore, and St. Louis.
"Leap's push to acquire more spectrum in new high-growth market clusters
located in urban and suburban areas such as Baltimore, Washington, D.C.,
and Philadelphia will help it withstand the continuous competitive
pressure from larger... competitors such as Sprint-Nextel and Verizon,"
Jessica Zufolo, an analyst at research firm Medley Advisors, wrote in a
note to clients.
The U.S. Treasury will receive just $13.7 billion from its latest
auction because of rules that permit small companies to earn discounts
of as much as 25%.
http://tinyurl.com/j77nv
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