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The auction of wireless spectrum in the US next month is likely to attract multi-billion dollar bids from not just from established mobile carriers, but also from others seeking to enter a booming market.

Indeed, as a recent Lehman Brothers investor briefing paper noted: ?The Federal Communications Commission?s auction of a massive amount of spectrum in late June could alter the balance of power in the US wireless services industry ? now dominated by three or four companies.?

It could also have significant implications for the current wireless service providers, tower operators and many technology companies hit by the long term shift of telecoms traffic towards wireless networks.

Significantly, the number of minutes of voice traffic carried over US mobile networks is expected to match the declining volume of voice minutes carried over the traditional fixed line networks for the first time this year.

The auction covers 90 Megahertz of so-called Advanced Wireless Spectrum (AWS) covering most of the US in the popular 1.7Gigahertz and 2.1Ghz bands and will take place on June 29. Initial applications were due in to the FCC by May 10, which has introduced new anti-collusion rules designed to prevent participants from discussing bids with each other.

Time Warner Cable said on Wednesday that it might bid for the auction together with the partners in its mobile telephony joint venture, which include cable operators Comcast, Cox and Advance/Newhouse and Sprint Nextel, the third-biggest US mobile carrier.

T-Mobile USA, the fourth largest US wireless operator which is owned by Deutsch Telecom?s T-Mobile unit, is expected to be one of the most aggresive bidders because it needs the spectrum in order to launch 3G and other services.

?T-Mobile is in the weakest spectrum position of the four national players,? notes the Lehman report. ?Consequently, despite management?s consistent talking point that ?it will be rational,? we expect T-Mobile to be an aggressive player in Auction 66.?

Analysts estimate that T-Mobile will spend as much as $6bn although the company has declined to comment. If T-Mobile USA fails to win a significant slice of the nationwide spectrum up for sale, some analysts believe the carrier will be forced to scale back its ambitions dramatically, or sell out to a rival.

Since spectrum is the basic ?raw material? for wireless carriers, the three other leading mobile operators ? Cingular Communications, Verizon Wireless and Sprint Nextel ? have all said they are would be interested ?at the right price,? but are unlikely to be particularly aggressive bidders.

However, Sprint Nextel might have greater clout if it bids with the cable companies, which have enormous financial muscle, analysts said.

Verizon Wireless, the joint venture between Verizon Communications and Britain?s Vodafone, spent $3bn last year to acquire spectrum in 23 markets from the bankrupt NextWave Wireless but might be willing to bid up to about $3bn to accumulate more ?headroom.?

Similarly Cingular has plenty of spare capacity having acquired AT&T Wireless last year and says it has no need to bid for additional spectrum. Nevertheless, the nation?s largest carrier could still register it interest in bidding.

Sprint Nextel has arguably the most advantageous spectrum position. Current network traffic uses only a small percentage of the spectrum in the 1900 range that Sprint acquired in the mid 1990s and company has additional spare spectrum in the 2.5Ghz range which it is expected to use to launch a 4G wireless broadband data service.

Other potential wireless bidders that have been mentioned include rural regional carriers, Dallas, Texas-based Metro PCS, California-based Leap Wireless.

However much of the attention leading up to the auction has focused on what the Lehman note calls ?non-traditional bidders.?

?We believe non-traditional companies acting alone or in partnerships with current wireless service providers will be active in part to change the negotiating dynamics with the national telecoms service providers regarding ?net neutrality,?? said Lehman. ?Non traditional bidders could include technology companies, cable operators or satellite operators.?

While the report did not identify any potential non traditional bidders by name, among companies that have been mentioned are Google, the internet search and advertising giant, and Microsoft although neither has voiced public plans.

These companies are at the forefront of the so-called ?net-neutrality? debate and the ability to deliver their advanced services over a broadband wireless connection rather than the Internet could provide them with leverage over traditional carriers like AT&T, Verizon and BellSouth which would like to charge them additional fees for delivering video and other services over their fixed line networks.

Copyright The Financial Times Limited 2017. All rights reserved.
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