By Jeremy Pelofsky
U.S. wireless companies face new competition on Wednesday as they
start bidding on licenses for advanced wireless services like
high-speed Internet -- from the satellite and cable television
The U.S. Federal Communications Commission will auction 1,122 licenses
that analysts predict may raise $15 billion and last several
weeks. The 168 bidders, including the top cable and satellite
providers, have made $4.3 billion in deposits.
"That appears to indicate strong industry interest in the spectrum,
though some of the parties may be more serious than others," Stifel,
Nicolaus & Co. analysts said in an August 4 research note.
Wireless companies are eager for additional airwaves as they expand
new offerings like video service and high-speed Internet
access. Companies reported an eight-fold jump to more than 3 million
subscribers in the last six months of 2005.
The sale comes as telecommunications and television providers are
battling to attract consumers to a package of voice, Internet and
video services, including wireless. Some consumers are also moving
away from traditional phone service.
The auction of 90 Megahertz (Mhz) of spectrum will kick off on
Wednesday with two rounds of bidding and expand to three rounds on
Thursday and subsequent business days until there are no new bids or
There is some risk that the sale could fall short of predictions
because some bidders may prefer to wait for airwaves television
broadcasters are giving up in 2009. That spectrum is seen as more
desirable because it transmits further and can more easily penetrate
MEDIA COMPANIES IN THE GAME
The biggest downpayment, $972.5 million, came from a joint venture of
U.S. satellite television rivals, DirecTV Group Inc. and EchoStar
Communications Corp. but also includes media conglomerate Liberty
It was followed by $637.7 million from a group of cable operators --
including the top two Comcast Corp. and Time Warner Inc. -- that have
joined forces with No. 3 wireless carrier Sprint Nextel Corp..
"We are surprised with the strong interest from the satellite and
cable (with Sprint) companies," said Bear Stearns analyst Phil Cusick
in a July 31 research note. The companies have not disclosed details
of their plans if they win.
The auction is especially critical for No. 4 U.S. carrier T-Mobile
USA, a unit of Germany's Deutsche Telekom AG, because it does not have
as much spectrum. The company put down $583.5 million.
"We expect T-Mobile USA to bid aggressively for spectrum in several of
the major markets (especially New York) as it has less spectrum than
the other national wireless carriers," Exane BNP Paribas analyst
Stuart Birdt said in a research note.
He estimated that the carrier had about 25 Mhz of airwaves in the top
25 markets but only 20 Mhz in New York, less than half compared to the
three bigger carriers.
Other qualified bidders include No. 1 provider Cingular Wireless, a
joint venture of AT&T Inc. and BellSouth Corp., and Verizon Wireless,
the No. 2 carrier. It is a venture between Verizon Communications and
Vodafone Group Plc.
Another bidder drawing attention is money manager Mario Gabelli. He
and 38 affiliates agreed last month to pay $130 million to settle a
government probe into whether they improperly took advantage of
discounts offered to smaller bidders in past FCC wireless auctions. He
Gabelli, who heads the $28 billion asset management group Gamco
Investors Inc., has ties in the upcoming sale to the venture Lynch AWS
Corp., which has paid a $1.5 million downpayment.
Copyright 2006 Reuters Limited.
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