- Verizon dominated Auction 113, spending $3.2 billion for 82 AWS-3 licenses
- T-Mobile won the most licenses, picking up 102 licenses for $278 million, while AT&T spent $121 million on 10 licenses
- SpaceX made a light showing, buying two licenses – Cincinnati and the Gulf of America
The Federal Communications Commission (FCC) concluded Auction 113 last week and announced the winners on Friday, with Verizon emerging as the biggest spender.
Verizon spent $3.2 billion for 82 licenses, accounting for the lion’s share of the auction’s $3.57 billion proceeds. The second biggest bidder revenue-wise was T-Mobile, which pledged $278 million for 102 licenses. AT&T spent $121 million for 10 licenses.
The auction was relatively small by historical standards, selling 200 licenses in a hodgepodge of markets across the country. Most of these are licenses that Dish Network – now EchoStar – had to give back to the FCC after it was deemed to have violated designated entity (DE) rules in 2015.
In the reauction, EchoStar, bidding under the name Conundrum Wireless, won just two markets in Guam for $1 million. The company basically bid until the auction met the $2.9 billion threshold, after which it was no longer subject to a penalty payment.
Verizon’s strong showing
The markets Verizon bought include New York, Chicago and Boston. Most analysts weren’t surprised by Verizon’s strong showing given it’s already got a good foothold in the AWS-3 ecosystem.
All told, Verizon’s haul in the AWS-3 auction amounts to a 32% increase in Verizon’s pre-auction holdings of AWS-3 spectrum and, more relevantly, less than a 2% increase in Verizon’s pre-auction holdings of mid-band spectrum overall, according to MoffettNathanson analyst Craig Moffet.
For Verizon, the bigger payoff may not be capacity so much as coverage, he said. At 1.7 GHz, the AWS-3 spectrum’s propagation is substantially better than the C-band at 3.7-3.9 GHz. Verizon was also the highest bidder in the C-band auction that ended in 2021, where it spent about $53 billion.
In a note for investors today, New Street Research analyst David Barden said Verizon’s acquisition of the major licenses in the AWS-3 auction makes it clear that it’s interested in the remaining paired AWS-3 spectrum that EchoStar holds.
“We think that this auction puts a floor value of $8.1 billion, or $2.94/MHz-POP, on the paired spectrum that EchoStar still owns and we wouldn’t be surprised if the two companies eventually come to terms now that a fair market value has been set,” he said.
SpaceX and Auction 113
When it started on June 2, the auction’s big mystery was what SpaceX was going to do. Was it there to jack up the prices for the carriers or was it practicing for the bigger prize, which will be next year’s upper C-band auction?
Turns out, SpaceX bought just two licenses – Cincinnati and the Gulf of America/Mexico – for about $8.5 million.
“If SpaceX wants to build its own wireless network, this auction didn’t support that thesis, but admittedly this auction is too small to make any conclusions,” wrote TD Cowen analysts in a June 26 report for investors.
SpaceX was lightly active throughout the auction, they said, noting that it bid in only six markets: Charlotte, N.C.; Cincinnati; Moline, Ill.; Great Falls, Mont.; the Gulf of America; and Richland, Wash., some of which are hot spots for data centers.
Why Cincinnati?
SpaceX’s interest in the Gulf of America makes sense because it’s home to oil rigs and maritime traffic that rely on Starlink’s satellites. The selection of Cincinnati is less obvious.
Barden shared three working theories on that. One is it was a mistake as SpaceX educates itself about the intricacies of the FCC auction process and SpaceX didn’t intend to win it.
A second theory is SpaceX planned to win a top 50 market in order to showcase its capabilities as a partner of choice. It would also provide a test bed for how best to serve mobile customers in commercial buildings, residential multi-dwelling units (MDUs) and inside buses, subways and cars, he said.
A third theory is it was just a test run by SpaceX and their true intention is to be a contender in next year’s upper C-band auction.
Still, the idea of SpaceX buying enough spectrum to build a mobile network from scratch poses a number of questions. If that’s the case, why not buy EchoStar’s network that’s set for decommissioning?
“Despite their current assertion of U.S. terrestrial mobile intentions, being last to market in a saturated market with the least amount of spectrum doesn’t seem like a great business opportunity,” Barden said. “Dish tried and failed.”
In addition, between buying spectrum and building networks, branding, retail and sales departments, the amount of heavy lifting that incumbent carriers have already done is enormous.
“It would be WAY more profitable to partner and collect checks,” he said. “But maybe that’s just us.”