Verizon Communications Inc.
VZ 0.16%
It secured more than half of the wireless waves offered in a US government auction that racked up a record $ 81 billion in bids, according to details released Wednesday.
Verizon promised $ 45.5 billion for the rights to mid-range spectrum, which can extend the range and bandwidth of its fifth-generation wireless service. AT&T Inc.
T 0.69%
bid $ 23.4 billion, while T-Mobile US Inc.
TMUS 0.13%
offer $ 9.3 billion.
The results answered a question that has absorbed investors in the wireless industry since the Federal Communications Commission launched the auction in December. License purchases to use certain radio waves are among the most important checks a cell phone operator can issue.
Wireless companies have taken over larger and larger parts of the electromagnetic spectrum to keep up with the growing demand for music, video, and software from their customers streamed to their smartphones. Asset shortages can degrade service and put the carrier at a competitive disadvantage.
Verizon and its rivals are improving their 5G services this year following the launch of Apple. Inc.’s
Latest iPhone and other devices that can support the high-speed specifications. But Verizon’s need for mid-range spectrum was deemed particularly acute after T-Mobile amassed a sizable amount of similar assets through its 2020 purchase of Sprint.
Verizon, the nation’s largest operator in terms of subscribers, has focused much of its wireless investments on the high-frequency millimeter wave spectrum in recent years. Those licenses can support even higher internet speeds, but they often have difficulty transporting data remotely.
The commission’s auction rules prohibit bidders from commenting on the process for several days. AT&T, Verizon and T-Mobile are scheduled to hold public briefings in March to update investors on their long-term strategies, including their network upgrade goals.
The most recent spectrum sale offered cell phone companies, cable TV providers, and other qualified bidders the opportunity to expand their wireless operations into the C-band range, a band of waves previously limited to satellite communications. . The commission auctioned 280 megahertz of the band, leaving the rest to traditional satellite users and guard bands to block the interference.
Strong demand for 5G-compatible frequencies brought initial offerings to a record $ 80.9 billion. A second phase designed to rank the types of licenses granted to each bidder brought the total last week to $ 81.2 billion.
US Cellular Regional Wireless Service Provider Corp.
USM 0.34%
offered $ 1.3 billion for licenses in certain areas. An affiliate of private equity firm Grain Management spent slightly less than that amount.
Other expected bidders were largely on the sidelines. A Dish Network Corp. affiliate offered $ 2.5 million, suggesting that the satellite TV operator will rely on its existing spectrum cache to build a new 5G network from scratch. C&C Wireless Holding Co., a joint venture of cable operators Comcast Corp.
and letter communications Inc.,
did not earn any licenses.
Initial payments for spectrum licenses are due March 10. Winning bidders will also spend an additional $ 14 billion to cover the costs of satellite operators shifting their operations to a narrower band of spectrum.
The amounts promised could have lasting effects on the companies that bought the licenses. AT&T recently obtained a $ 14.7 billion loan for the purchase of spectrum, among other priorities. Verizon signed a $ 25 billion term loan on Wednesday.
Operators will use the income from customers’ mobile phone bills to pay off those debts over time. Businesses are expected to tout the broader benefits 5G service offers to commercial devices, rather than smartphones, as a justification for the spending spree.
“They need to attach some revenue to this huge check that they are writing,” said John Hodulik, industry analyst at UBS Group. AG
.
Hodulik said that Verizon, in particular, will discuss the benefits that C-band spectrum offers its Internet customers from home. The combination of radio waves acquired this year with stocks of high-frequency spectrum could support a service that “could be kind of a competitor to cable,” he said.
The most recent auction was not the last chance for cell phone operators to secure mid-range spectrum. Jessica Rosenworcel, the acting chairman of the FCC, proposed this week a plan that would launch another auction for 100 megahertz of similar mid-range spectrum in early October.
Write to Drew FitzGerald at [email protected]
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