Cowen estimates Verizon’s C-band spend at $35B

Gross proceeds from the C-band auction have smashed all expectations. Proceeds stand at $80.2 billion after 62 rounds. But the activity is now slowing with demand equaling supply for 366 of the license products, while demand is still greater than supply for 86 of the license products, according to Sasha Javid, whose BitPath firm is monitoring the auction results.

There are 57 qualified bidders in the C-band auction, and today the analysts at Cowen, led by Colby Synesael, estimated that the auction will ultimately net between $81 billion to $83 billion. This would equate to $0.94-0.96/MHz-PoP.

Cowen is speculating the following spend levels in the C-band auction:

  • Verizon: $35 billion
  • AT&T: $20 billion 
  • Cable: $10-15 billion 
  • T-Mobile: $10-15 billion 
  • Dish: $0-5 billion

“We do not expect Verizon to change its capex plan or alter its dividend policy but acknowledge a buyback, which we had thought could occur as early as 2022/2023, would be pushed out to 2024/2025,” wrote Cowen.

In early 2020, Verizon estimated its capex spend for the year between $17-$18 billion to pay for its 5G deployments as well as additional 4G densification and its ongoing fiber build. In March, Verizon boosted that capex number to $18.5 billion for 2020.

LightShed Partners analysts Walter Piecyk and Joe Galone wrote earlier this week, “Verizon appears to be on pace to pay 2x what most expected, and notably higher than our $30 billion estimate, which included CBRS.”

Verizon spent about $1.89 billion for Priority Access Licenses (PALs) at the CBRS auction earlier this year.

RELATED: Verizon, Dish & cable top list of CBRS auction winners

“We don’t think a higher-than-expected spectrum cost will negatively impact Verizon’s capital investment plan,” wrote LightShed. “If anything, the higher price puts more pressure on Verizon and any high bidder to build more quickly to secure a return on this investment.”

Although Verizon has focused on mmWave spectrum and the deployment of small cells for the initial phase of its 5G deployment, the LightShed analysts speculate that Verizon’s high bidding for C-band spectrum means that it will renew investment in macro towers. “We believe Verizon is about to pivot to macro cell site investment in actions if not words. The shift to macro investment is inevitable for a company who has been reducing its activity with macro tower companies for the past five years.”

Speaking at a Citi investor conference yesterday, American Tower's CEO Tom Bartlett said that his company portends profits from the high C-band spending. “I think what their spending on C-band is indicative of how optimistic they are on optimizing 5G technology going forward, which I think is a very strong statement for our business,” said Bartlett. “They’re not going to be spending all of this cash, all this capital, on C-band without the ability to spend a lot of capex on deploying it.”

AT&T and T-Mobile

In early 2020 AT&T estimated its capex spend for the year at about $20 billion. Of AT&T’s speculated C-band investment, the Cowen analysts said, “We expect T to raise funds via debt. We do not expect AT&T to change its capex plan or alter its dividend policy, which we note it recently elected to keep flat in 2021 (vs. 2020).”

RELATED: AT&T’s debt hampers its C-band aspirations

Finally, of T-Mobile, Cowen said it expects the un-carrier to bolster its spectrum holdings in top markets such as New York City, Los Angeles, San Francisco, Chicago and Boston where it has below its average holdings. Cowen predicts that T-Mobile has acted as an “agitator” in the auction “perhaps along with Dish.” Neither T-Mobile nor Dish need the C-band spectrum, but their participation in the auction could have helped drive up the prices.

The FCC could disclose the C-band auction winners by late February or early March.