If new FCC chairman Tom Wheeler thought he would be able to ease himself into his new role, he was wrong. The M&A merry-go-round in US telecoms may not have stopped with the Sprint/Softbank/Clearwire deal, with Dish’s Charlie Ergen threatening to take another ride, hinting at a bid for T-Mobile. And in a shock move, Sprint has decided to pass on bidding for the PCS H Block of spectrum, to be auctioned in January.
It was widely assumed that Sprint would bid for ‘ and probably win ‘ the H Block, the first spectrum to be auctioned by the FCC for five years, because it is adjacent to the PCS G Block where the carrier is rolling out its initial LTE services. Indeed, some of the cellco’s multiple disputes with Dish over the past year have focused on the risk that the satellite-TV provider’s planned LTE network ‘ in its mobile satellite band ‘ would interfere with the H Block.
But following the deals which saw Softbank taking 80% ownership of Sprint, and Sprint taking full control of Clearwire, the US’s third operator has an array of spectrum to feed into its LTE build-out and its Network Vision multimode architecture. Perhaps influenced by its new parent, the company said in a statement that it would not participate in the auction of a 10MHz block in the 1.9GHz band, even though it would have been a simple matter to add that spectrum to the G Block and effectively double its current PCS band capacity.
The statement said: ‘Sprint is focused on gaining access to more low band spectrum to add to the company’s spectrum portfolio, so we have opted not to participate in the upcoming H Block auction. With the launch of Sprint Spark [the firm’s recently announced triband LTE program], Sprint is working to deploy its 2.5GHz licences along with licenses in 800MHz and 1.9GHz to provide customers greater network speeds and capacity.’
The comments suggest that Sprint will reserve its cash for the next, and far larger, FCC sale, the incentive auction of 600MHz TV spectrum for LTE. This would be more complicated to add into Sprint’s already eccentric collection of 4G frequencies, but would support stronger propagation for cost-effective rural coverage and indoor penetration, than the higher bands. Verizon and AT&T are better placed than Sprint in low frequencies because of their dominance of the 700MHz spectrum.
It is not clear who else might bid, and whether the auction will now hit its reserve price of $1.56bn, which is earmarked to build the long-awaited national public safety network. Verizon and AT&T will refarm PCS frequencies for LTE, so may go after additional capacity.
Dish, still looking out for more affordable spectrum to supports it LTE plans, will almost certainly be a contender, given that it adjoins the H Block too. It is also looking at acquiring further mobile satellite frequencies from bankrupt LightSquared. And, having been the loser from the Sprint/Softbank/Clearwire alliance ‘ it made its own bids for both Sprint and Clearwire earlier this year ‘ it could also try another ambitious spectrum play by making an offer to acquire T-Mobile USA, itself enlarged by a merger with MetroPCS.
Ergen said on a conference call this week that a deal with T-Mobile was still ‘on the table’. He repeated his opinion that Dish will need a physical network to make it economically viable to launch its LTE services, as well as additional spectrum capacity. One option would still be an alliance with Sprint to use the Network Vision infrastructure to host Dish LTE, perhaps in return for the content and TV deals that Sprint lacks. Ergen has not hinted at such a deal, but commented on the call: ‘I don’t ever rule out anything. I think acquiring a company, selling our company, merging, partnering , those are all on the table.’ Sprint has also been mooted as a possible acquirer of T-Mobile.
Meanwhile, TMo itself is exploring another way to add to its own spectrum arsenal. According to Reuters, it may use the proceeds of a share offering to fund the purchase of assets in a private transaction. The carrier said in a regulatory filing that some of the income from an upcoming offering of 72m shares, worth about $2bn, would finance the purchase of new spectrum, whether privately or at auction. The private deal which is reportedly under consideration has not been identified but like Sprint, TMo does not intend to take part in the H Block sale.