Analysts predicted T-Mobile US would be the biggest winner in the latest US auction of mobile spectrum, after the Federal Communications Commission (FCC) announced all major operators had been approved to take part in the process when it begins later this month.
T-Mobile’s acquisition of Sprint means it already owns or leases a large chunk of the mid-band 2.5GHz spectrum involved in the sale. However the process, dubbed Auction 108, covers about 8,000 licences which are mostly in rural areas, offering the operator a chance to close white spaces, gaps in its current portfolio.
Blair Levin, policy adviser to New Street Research, branded T-Mobile’s current spectrum footprint as “Swiss cheese” but told Mobile World Live (MWL) the operator had largely prevailed over small rural wireless providers in the FCC’s various policy decisions for designing the auction, resulting in a set-up intended to provide an efficient mechanism for allocating spectrum to the operators which will use it the most.
The rest of the 2.5GHz band is currently under the auspices of Educational Broadband Service (EBS) licences, but the FCC wants to make this portion available to operators and T-Mobile appears to be in the driver’s seat.
EBS licences were originally awarded in circle configurations around the various schools years ago
Phil Burnett, communications services analyst with New Street Research, explained white spaces are the diamond shape left in-between four connected circles.
Levin and Burnett stated AT&T, Verizon and, to a lesser extent Dish Network, could participate in the auction just to drive up the prices on T-Mobile.
“They would never frame it that way, of course, but absolutely that is what they are doing,” Burnett commented.
Burnett noted Verizon spent billions in 2021 to cover its towers with C-Band radios and it would cost it several billion more to add 2.5GHz.
AT&T spent more than $9 billion for 1,624 permits in the FCC’s 3.45GHz auction while Dish Network spent $7.3 billion on 1,232: with neither operator using 2.5GHz spectrum, the New Street Analysts didn’t think they would be willing to increase their debt by bidding large amounts in Auction 108.
Levin cited estimates Dish Network’s 5G network build would cost $10 billion, noting this meant there is “no way” it would participate in Auction 108 at a meaningful level.
With the auction being broken up by counties across the US, there is a chance AT&T, Verizon or Dish Network could cherry-pick a few licences, but Levin stated it would be difficult to put a tower on a single location in a county without the signals propagating into nearby T-Mobile sites.
Roger Entner, founder and lead analyst with Recon Analytics, told MWL the 2.5GHz spectrum was “nice to have” for T-Mobile, but not a “must have” for now. He believes the operator “might be interested in some markets” but doesn’t expect it to target them all.
If T-Mobile does decide to run the table during the auction, Entner stated it would make it more difficult for financial investors to sell licences to small rural wireless providers because the mobile operator would have more bargaining power.
“The more T-Mobile wins the smaller the resale opportunity for the financial investors and the more uncertain the resale value of the spectrum.”
Burnett noted because the spectrum was effectively impaired compared with previous FCC spectrum auctions, Auction 108 could raise between $1.5 billion and $5.5 billion for the US government, but he leaned toward the lower valuation.
Even if Verizon, AT&T and Dish Network plan to bid just to drive up the cost, Levin doesn’t expect furious bidding among the largest operators, given the spectrum means more to T-Mobile.
Entner noted “we don’t know yet”, adding it “could be “a very exciting auction, or it could be quite the snooze fest”.