First round of FCC's AWS-3 auction draws $1.77B in bids, nearly 17% of total reserve price

The AWS-3 spectrum auction, the FCC's first major auction since 2008, kicked off with a bang. The first round of bidding drew provisional winning bids on 1,012 licenses. That totals around $1.767 billion in bids, or around 16.7 percent of the total $10.587 billion reserve price the FCC has set for the auction. A total of 1,614 licenses are up for grabs across 65 MHz of spectrum, including 15 MHz of unpaired uplink spectrum in the 1695-1710 MHz band.

Although 70 companies and entities are qualified to bid in the auction, most analysts expect Verizon Wireless (NYSE: VZ), AT&T Mobility (NYSE: T), T-Mobile US (NYSE:TMUS) and Dish Network (NASDAQ: DISH) to make up the bulk of the bidding.

As RCR Wireless notes, the 10x10 MHz AWS-3 J-Block license for New York City received a great deal of attention during the first round of bidding. Wireless carriers typically like to get 10x10 MHz blocks for LTE deployments. The J-Block covering the New York City area received eight bids during the opening round of the auction and a top bid of $88 million. Other licenses generating interest include the 10x10 MHz J-Block license for Los Angeles, with a top bid of $78.9 million, and the 5x5 MHz H-Block license for New York City, with a top bid of $48.5 million.

Fitch Ratings thinks that total bids could end up being around $18 billion for the auction, including $14 billion to $17.2 billion for 50 MHz of paired AWS-3 licenses (the 1755-1780 MHz and 2155-2180 MHz bands). "T-Mobile and Dish Network are key wildcards that could drive spectrum prices to the upper end of the estimated range or beyond depending on their level of interest," Fitch said.

"Fitch believes Verizon Wireless, AT&T Mobility, and T-Mobile have material financial flexibility within their credit profiles to acquire spectrum in the upcoming AWS-3 and TV broadcast auctions," the credit rating agency said in a statement "Both Verizon Wireless and AT&T Mobility could spend $12 billion-$16 billion before pressuring the ratings. T-Mobile raised $3 billion of debt in anticipation of the auction. Fitch expects Dish, which has substantial flexibility, may acquire less spectrum if valuations are high and may have more interest in the lower value, uplink spectrum."

For more details on the AWS-3 auction, check out our spectrum auction primer.