Verizon spends $ 45.5 billion on top 5G spectrum bidders

The results answered a question that has absorbed investors in the wireless industry since the Federal Communications Commission launched the auction in December. Purchases of licenses to use certain airwaves are among the biggest checks a mobile operator can make.

Wireless companies have captured growing chunks of the electromagnetic spectrum to meet growing customer demand for music, video, and software to stream to their smartphones. A shortage of assets can degrade service, putting a carrier at a competitive disadvantage.

Verizon and Competitors Improve 5G Services This Year After Apple Launch Inc.

latest iPhone and other devices that can support high speed specification. But Verizon’s need for the mid-range spectrum was seen as particularly acute after T-Mobile amassed a significant cache of similar assets through its purchase of Sprint in 2020.

Verizon, the country’s largest operator in terms of subscribers, has focused a large portion of its wireless investments on high-frequency millimeter wave spectrum in recent years. These licenses can support even higher internet speeds, but often struggle to transport data remotely.

The commission’s auction rules prohibit bidders from commenting on the process for several days. AT&T, Verizon and T-Mobile are expected to hold public briefings in March to brief investors on their long-term strategies, including their network upgrade goals.

The most recent spectrum sale offered cell phone companies, cable TV providers and other qualified bidders the opportunity to expand their wireless operations to C-band, a waveband previously reserved for satellite communications. The commission auctioned off 280 megahertz of the band, leaving the rest to satellite users in place and guard bands to block interference.

Strong demand for 5G-capable frequencies drove initial offerings to a record $ 80.9 billion. A second phase designed to sort out the types of licenses awarded to each bidder brought the total last week to $ 81.2 billion.

US Cellular regional mobile operator Corp.

USM 0.84%

offered $ 1.3 billion for licenses in certain areas. A subsidiary of private equity firm Grain Management spent slightly less than this amount.

The other expected bidders remained largely on the sidelines. A subsidiary of Dish Network Corp. made an offer of $ 2.5 million, suggesting that the satellite TV operator will leverage its existing spectrum cache to build a new 5G network from scratch. C&C Wireless Holding Co., a joint venture of cable operators Comcast Corp.

and Charter communications Inc.,

did not obtain any license.

Down payments on spectrum licenses are due March 10. Successful bidders will also spend about $ 14 billion more to cover the costs of satellite operators moving their operations to a narrower band of the spectrum.

The money pledged could have lasting effects on the companies that bought the licenses. AT&T recently took out a $ 14.7 billion loan to purchase spectrum, among other priorities. Verizon entered into a $ 25 billion term loan on Wednesday.

Carriers will use revenue from customers’ cell phone bills to pay off those debts over time. Businesses are generally expected to tout the broader benefits that 5G service offers to business devices, rather than smartphones, as justification for the spending spree.

“They have to tie some income to this huge check they write,” said John Hodulik, industry analyst at UBS Group. AG

.

Mr Hodulik said Verizon in particular will discuss the benefits that C-band spectrum offers to its home Internet customers. Combining the airwaves acquired this year with existing possessions of high-frequency spectrum could support a service that “could in fact be a competitor to cable,” he said.

The most recent auction was not the last chance for mobile operators to get mid-range spectrum. Jessica Rosenworcel, the acting chairman of the FCC, this week proposed a plan that would launch another auction for 100 megahertz of similar midrange spectrum in early October.

Write to Drew FitzGerald at [email protected]