Cellular licenses in the US: 5G auction price reaches record high

Wednesday December 23, 2020

Cellular Licenses in the United States
5G auction price reaches record high

The future of the internet is 5G. The responsible authority FCC will auction the corresponding licenses. It will be a record sum, that much is clear. T-Mobile has already secured its access.

In the United States, the Federal Communications Commission FCC's current auction of 5G cellular licenses has brought in more than $ 66.4 billion in bids in three weeks – a record amount that could change the way cellular operators do business for the next decade.

The sum is already higher than the $ 44.9 billion generated by the 2015 auction of midrange wireless licenses that US wireless operators used to improve their 4G services. The same companies are now investing billions of dollars in the fifth generation of cellular communications. The 5G standard is designed to accelerate the flow of data to phones and other wireless devices such as PCs, cars and industrial plants.

All bids are kept secret until the end of the auction process. Analysts expect big names like AT&T Inc. and Verizon Communications Inc. to get a large chunk of the licenses to match the capacity rival T-Mobile US Inc. received with the acquisition of Sprint in February.

"The mid-band spectrum will be the future of 5G," said Walt Piecyk, a telecommunications analyst with analysis house Lightshed Partners. He added that T-Mobile's merger with Sprint "clearly puts pressure on Verizon and AT&T" to catch up with their rival's war chest.

Money flows into the state treasury

Cellular service providers are also bidding against investment firms and new entrants. The satellite provider Dish Network Corp. won many of the licenses in 2015. The company raised more cash this month through a $ 2 billion convertible loan to fund additional network investments. Dish is building its own cellular network after acquiring assets and approximately 8 million customers from Sprint.

Cable internet providers could also affect the outcome of the auction after years of experimenting with cellular services. Comcast Corp. and Charter Communications Inc. have teamed up for the current auction after spending nearly $ 1 billion on a minor license sale earlier this year.

The radio frequencies offered are between 3.7 and 4 gigahertz, a medium range that is considered well suited for 5G services. New 5G smartphones can already use these frequencies in other countries that have released the spectrum. The US sells the frequency ranges in large blocks, which increases their value.

The high bids benefit the US Treasury Department, which collects a one-time profit after the winners pay for their licenses. The winners will also have to spend at least $ 13 billion more to modify the equipment of some satellite companies that are already using the frequencies. The satellite operators have approved an FCC plan that shifts their TV transmissions to a narrower part of the radio spectrum, the so-called C-band.

Mobile operators can afford to commit to large payments as they have low borrowing costs and relatively stable service revenues, said Raymond James analyst Frank Louthan.

The FCC will not announce the winners of the auction until a few days after the auction ends in February. The auction participants are only allowed to make limited statements about the auction process. This limits their ability to raise capital or discuss larger transactions in which frequencies play a role.