VZ
Making sense of the record-breaking 5G spectrum auction
- Telecom companies themselves are still in a quiet period for a couple
of weeks, but with full results from the FCC's C-band airwaves auction in
hand, there's a mountain of data for investors to pore through for
effects
and outcomes on the race to better 5G.
- The midband spectrum auction ended last month with a record $80.9B in
bids - unnerving some supporters of the U.S. telecom "duopoly" of
Verizon (NYSE:VZ) and AT&T (NYSE:T), knowing they would have to spend
heavily for their networks to catch up with that of T-Mobile (NASDAQ:TMUS
), which has been working to integrate Sprint's network after last
year's merger.
- And they spent on cue. Verizon was the top spender overall, bidding
nearly $45.5B, while AT&T bid "just" $23.4B, though it's well known that
AT&T has less financial flexibility, carrying heavy debt from the Time
Warner acquisition. And T-Mobile (arguably in the catbird seat as far as
airwaves go) spent $9.3B. Those three won 90% of the 5,684 licenses up
for
sale.
- Among the prominent bidders, they were followed by U.S. Cellular (NYSE:
USM), a distant fourth in size among national carriers, with $1.28B in
bids.
- The airwaves distributed through the auction are critical to any
future players in 5G. Verizon's strategy led it to build up
high-frequency
millimeter wave spectrum - fast airwaves carrying much more data than
lower
frequencies, but with a short geographic travel ability. Meanwhile, the
lowband spectrum in which T-Mobile has taken a strong position travels
further geographically but carrying significantly less data. Midband
airwaves offer a balance between speed and coverage.
- Even after committing $45.5B (and $53.4B total when you add in needed
midband relocation fees), Verizon will still be in second place to
T-Mobile
in terms of sub-6 GHz spectrum, despite that mmWave lead.
- Oppenheimer downgraded Verizon and AT&T on the results - noting that
both were in a "must-win" position to catch up with T-Mobile, leading to
some valuation compression.
- And now that we know the eye-popping headline numbers - who spent how
much, and what their general relative spectrum strengths are - setting
aside strategic considerations, who got the most bang for the buck in
this
record-breaking auction? Looking at MHz-POP - the measure taking into
account frequency and population served, multiplying megahertz times
people
in a given coverage area - Verizon prevails among the big three, paying
$0.92/MHz-POP excluding clearing costs.
- Verizon was followed on that measure by AT&T ($0.96/MHz-POP), and by
T-Mobile ($1.13/MHz-POP). Dish Network (NASDAQ:DISH) also got some
inexpensive coverage, with $0.65/MHz-POP, but with a relatively paltry
overall spend (just $3M vs. the billions shelled out by the big three).
- A final observation from Mike Dano at LightReading: The propagation
characteristics of midband spectrum mean that big spender Verizon will
need far
more transmission sites to cover the same geographic area than they
might need with fewer lowband sites. That could mean a boon for
tower/small-cell providers like Crown Castle International (NYSE:CCI)
and American Tower (NYSE:AMT).
|Today, 11:02 AM
Making sense of the record-breaking 5G spectrum auction
- Telecom companies themselves are still in a quiet period for a couple
of weeks, but with full results from the FCC's C-band airwaves auction in
hand, there's a mountain of data for investors to pore through for
effects
and outcomes on the race to better 5G.
- The midband spectrum auction ended last month with a record $80.9B in
bids - unnerving some supporters of the U.S. telecom "duopoly" of
Verizon (NYSE:VZ) and AT&T (NYSE:T), knowing they would have to spend
heavily for their networks to catch up with that of T-Mobile (NASDAQ:TMUS
), which has been working to integrate Sprint's network after last
year's merger.
- And they spent on cue. Verizon was the top spender overall, bidding
nearly $45.5B, while AT&T bid "just" $23.4B, though it's well known that
AT&T has less financial flexibility, carrying heavy debt from the Time
Warner acquisition. And T-Mobile (arguably in the catbird seat as far as
airwaves go) spent $9.3B. Those three won 90% of the 5,684 licenses up
for
sale.
- Among the prominent bidders, they were followed by U.S. Cellular (NYSE:
USM), a distant fourth in size among national carriers, with $1.28B in
bids.
- The airwaves distributed through the auction are critical to any
future players in 5G. Verizon's strategy led it to build up
high-frequency
millimeter wave spectrum - fast airwaves carrying much more data than
lower
frequencies, but with a short geographic travel ability. Meanwhile, the
lowband spectrum in which T-Mobile has taken a strong position travels
further geographically but carrying significantly less data. Midband
airwaves offer a balance between speed and coverage.
- Even after committing $45.5B (and $53.4B total when you add in needed
midband relocation fees), Verizon will still be in second place to
T-Mobile
in terms of sub-6 GHz spectrum, despite that mmWave lead.
- Oppenheimer downgraded Verizon and AT&T on the results - noting that
both were in a "must-win" position to catch up with T-Mobile, leading to
some valuation compression.
- And now that we know the eye-popping headline numbers - who spent how
much, and what their general relative spectrum strengths are - setting
aside strategic considerations, who got the most bang for the buck in
this
record-breaking auction? Looking at MHz-POP - the measure taking into
account frequency and population served, multiplying megahertz times
people
in a given coverage area - Verizon prevails among the big three, paying
$0.92/MHz-POP excluding clearing costs.
- Verizon was followed on that measure by AT&T ($0.96/MHz-POP), and by
T-Mobile ($1.13/MHz-POP). Dish Network (NASDAQ:DISH) also got some
inexpensive coverage, with $0.65/MHz-POP, but with a relatively paltry
overall spend (just $3M vs. the billions shelled out by the big three).
- A final observation from Mike Dano at LightReading: The propagation
characteristics of midband spectrum mean that big spender Verizon will
need far
more transmission sites to cover the same geographic area than they
might need with fewer lowband sites. That could mean a boon for
tower/small-cell providers like Crown Castle International (NYSE:CCI)
and American Tower (NYSE:AMT).
|Today, 11:02 AM
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