Offers for 5G airwaves have already surpassed $23 billion in a massive U.S. auction that could feature heavy bidding by Verizon Communications, which needs more spectrum to compete in the dawning era of ultrafast mobile connections.
Analysts expect Verizon to put up $20 billion in a field of 57 bidders that includes fellow mobile heavyweights AT&T and T-Mobile US, and cable companies Comcast Corp. and Charter Communications Inc. Collectively they could push bidding to a record $47 billion, according to 11 analysts surveyed by Bloomberg. Bidding started Dec. 8 and is expected to continue into the new year.
Wireless carriers see the auction as crucial to seizing global leadership in new 5G technology. As more countries are opening up use of midband frequencies, companies are buying airwaves that they hope will drive a yearslong surge of profits when deployed for next-generation mobile devices, autonomous vehicles, health-care devices and manufacturing facilities.
Here are the bidders and their motivations.
– Verizon: Verizon has the most wireless subscribers but trails its biggest peers in airwaves capacity. To help address this, the company has built a $21 billion war chest and has even more that it can tap for the auction. Analysts predict Verizon will outspend AT&T, the next highest bidder, by more than 2-1.
But to avoid showing their hand, executives have tried to downplay how eager they are to get ahold of the frequencies being sold.
“We’re happy with the assets we have, but we certainly look at C-band as something that has a significant opportunity around it as well,” Verizon Chief Financial Officer Matt Ellis said on an investor webcast in August.
Companies participating in Federal Communications Commission auctions typically don’t discuss tactics or goals for fear of violating rules aimed at preventing collusion among bidders.
The auction is a critical juncture for a company that built its brand on reliable wireless service and network quality.
Stakes are becoming higher as 5G comes online, providing connections for devices in homes, vehicles, schools and factories.
“Verizon desperately needs midband spectrum in order to be competitive in 5G longer-term,” said Kevin Roe, an analyst with Roe Equity Research.
– AT&T: AT&T can neither afford to fall behind in the 5G race, nor to spend as much as Verizon to lead the aerial land grab.
AT&T has $10 billion in cash on hand and possibly a further $16 billion coming with the potential sale of its DirecTV satellite-TV business and the agreed sale of Crunchyroll, its animated-video service.
But on the cost side, the company has a $184 billion debt pile to pay down, a $15 billion annual dividend, a $20 billion capital-spending budget and a WarnerMedia production schedule to keep up.
Chief Executive Officer John Stankey has made 5G expansion one of his top three priorities since taking over the job in July. AT&T has been the most aggressive of the group with free 5G iPhone promotions and boasts of having the fastest 5G network.
AT&T will spend about $9 billion in the auction, according to analyst estimates.
– T-Mobile: Of all the bidders, T-Mobile has the least need for midband spectrum. With its Sprint takeover earlier this year, T-Mobile acquired the largest swath of 2.5-gigahertz spectrum in the U.S.
Adding to that position would seem unnecessary, but T-Mobile could be interested in bolstering its coverage in major cities in an effort to defend its airwaves advantage.
T-Mobile will also be running interference. Without strong counterbids, Verizon could walk away with a majority of the airwaves for a relatively low price.
Analysts predict T-Mobile will bid $6 billion in the auction.
– Dish: Dish Network Corp. Chairman Charlie Ergen rarely sits on the sidelines of any airwaves deal, whether it’s an auction or a when a satellite operator lands in bankruptcy court.
Now that Dish is building its own 5G network, with a projected initial cost of $10 billion, there might be less cash available for the midband auction. But earlier this week, Dish announced plans to raise about $2 billion through a sale of convertible notes.
Dish will spend about $3 billion in the auction, according to the Bloomberg survey.
– Cable; Comcast and Charter have formed a joint venture called C&C Wireless Holding Co. to bid in the C-band auction. Both companies offer cable subscribers a mobile-phone service that runs on Verizon’s network.
The JV may be interested in acquiring airwaves outside its cable footprint “as deployment of its own cellular infrastructure makes sense from an economic perspective,” Cowen analyst Colby Synesael wrote in a note earlier this month.
The cable duo is expected to bid $5 billion.
The airwaves being auctioned are in the 3.7-gigahertz frequency range, known as the C-band, and are now used by satellite providers such as Intelsat SA and SES SA. The satellite companies will give up frequencies and operate in a smaller swath. In return, they will receive a portion of the auction proceeds. The remainder goes to the U.S. Treasury.
The C-band sale is the largest midband offering in the FCC’s history. The richest FCC auction to date raised $41 billion in 2015.
“By freeing up this wide swath of critical midband spectrum, the FCC is paving the way for Americans to receive fast 5G wireless services,” FCC Chairman Ajit Pai said as the auction began.
One potential problem with a portion of the C-band is interference concerns from aviation groups.
Radar altimeters — electronic devices that calculate an aircraft’s height above the ground — may suffer interference from the new 5G uses that begin after the auctioned airwaves are deployed, aviation groups say.
The FCC and industry have said interference isn’t likely because there is plenty of buffer between the envisioned 5G uses and the airwaves assigned to the altimeters.