Spectrum Prices are Likely to Rebound at US Auctions in January, says Analysys

. November 15, 2007

Spectrum auction fever will once again hit the US in January, with the FCC auctioning over 1000 licenses in the 700MHz band. AT&T’s recent USD2.5 billion purchase of 12MHz of the 700MHz band from Aloha Partners suggests that spectrum in this band will sell for significantly more than the spectrum at the AWS cellular auction in August 2006, says Analysys, the global advisor on telecoms, IT and media (www.analysys.com).

While the NASDAQ index has been rising since 2003, recent prices at PCS and AWS auctions have not. However, the price AT&T paid Aloha Partners indicates that spectrum prices may now be increasing. Aloha Partners originally acquired the spectrum in the 700MHz auction in 2002, when the telecom sector was yet to recover from the industry downturn. The average price paid in that auction was just USD0.042 per MHz per population, whereas AT&T’s expenditure of USD2.5 billion represents a valuation of USD1.06 per MHz per population.

“The 700MHz spectrum to be auctioned in January is likely to attract players seeking mobile TV spectrum, or low-frequency cellular spectrum to complement PCS or AWS spectrum purchased in recent auctions. Low-frequency spectrum is particularly valuable to cellular operators, due to its propagation characteristics, which mean that fewer base stations are required than when using PCS or AWS spectrum. As a result, traditional cellular operators are likely to be heavily involved in the auction. However, they could face competition from non-traditional players, such as Google, who are also looking to offer mobile broadband access services,” says Michael Kende, Principal Consultant at Analysys.

AT&T has guaranteed itself a healthy portion of 700MHz spectrum ahead of January’s auction, potentially setting the stage for prices to continue to track the NASDAQ as Verizon Wireless and the other operators battle it out with the potential entrants, including Google.

Category: Auction News

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