T-Mobile Buy of 600 GHz Licenses Expected to Get Regulatory OK
T-Mobile plans to buy 600 MHz licenses it has been leasing from Columbia Capital for $3.5 billion, the carrier said in an SEC filing. The deal requires approvals from regulators, including the FCC, but is expected to get them easily, especially since T-Mobile is already using the spectrum covered by the leases. The first stage of T-Mobile’s 5G build used its 600 MHz spectrum. T-Mobile Chief Financial Officer Peter Osvaldik said at a financial conference Tuesday the company doesn’t expect the deal to close for at least a year.
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Meanwhile, New Street cut its forecast for the 2.5 GHz auction, expected to be dominated by T-Mobile, from $3.4 billion to a maximum of $750 million. Some experts believe the take could be as little as $300 million (see 2208080061). The auction hit $171 million Tuesday, 15 rounds in. On Wednesday, the auction moves from two to four daily bidding rounds.
A lower outlook for the auction “follows the economic logic of supply and demand,” John Strand of Strand Consult emailed Tuesday: “If there are few bidders, prices will be low.” Strand said the 600 MHz transaction likely won’t “create big regulatory challenges” unless opponents press for some concession from the FCC.
“Considering that the [FCC’s] spectrum screen somehow seems to have disappeared, I don’t expect any obstacles to getting this transaction approved,” said Recon Analytics’ Roger Entner.
“Only 24% of the 8,017 licenses being auctioned are still seeing any competition, and excess demand has fallen to a level not seen until after round 40 in both of the last two mid-band auctions,” New Street’s Philip Burnett said of the 2.5 GHz auction. Prices have increased just 3.7% each round, “well below the 10% maximum growth that would be seen if demand resembled that of any recent mid-band auction,” he said. New Street said the price is $2.64 MHz/POP.
Burnett said T-Mobile should win “substantially all the licenses” in the 2.5 GHz auction and the lower expected spend “increases cash available for repurchases, and growing clarity around the spend clears a hurdle for the initiation of the repurchases.”
T-Mobile agreed to buy the licenses from two Columbia subsidiaries, Channel 51 License, for $1.9 billion, and LB License, for $1.6 billion, according to the SEC filing. The markets covered include Atlanta, Baltimore, Boston, Chicago, Dallas, Los Angeles, Minneapolis, New Orleans, Tampa, Salt Lake City, San Francisco, St. Louis and Washington, D.C., the filing said: “The Licenses range from 10 MHz to 30 MHz per market and cover over 108 million pops -- approximately one third of the US population.”
The leases for the Columbia licenses were expiring, which presented an opportunity, Osvaldik said during an Oppenheimer financial conference Tuesday. The spectrum covers about 45% of the provider’s postpaid base, he said. T-Mobile is “very opportunistic, disciplined and strategic with what spectrum purchases we’re making,” he said.
T-Mobile is following a different path from its competitors in using low-band for 5G, Osvaldik said. “We have dedicated low-band to 5G -- we’re not using dynamic spectrum sharing,” he said: “That provides not only reach, coverage, but also in-building penetration.” The low-band now covers 320 million POPs, he said.
“There continues to be a perception issue with high-speed internet" and whether fixed wireless can "really compete,” Osvaldik said. T-Mobile’s download speeds are faster than median speeds of major cable operators, he said. “Speed is important” with increased mobile gaming, more hot spot use and other trends, he said. People want “coverage, they want performance, and they want reliability and that’s really what they get with T-Mobile,” he said: “That’s evidenced by the subscriber gains that we’re getting.”
“Investors will debate whether T-Mobile got a good price or a bad price,” New Street’s Jonathan Chaplin told investors: “What is clear: they have secured a strategic asset at a price they could afford.”