US telecoms regulator the FCC has proposed preventing the nation’s largest operators from making joint bids in next year’s spectrum auction, in an effort to ensure it is open to as many parties as possible. Roger Sherman, head of the regulator’s…
US telecoms regulator the FCC has proposed preventing the nation’s largest operators from making joint bids in next year’s spectrum auction, in an effort to ensure it is open to as many parties as possible.
Roger Sherman, head of the regulator’s wireless telecoms bureau, said in a blog post that the FCC’s proposal aims to create new opportunities for smaller players in the mobile space.
Referring to the trend towards in-sector consolidation, he said the authority must ensure the largest providers are not able to limit broad participation in the auction.
“If two of the largest companies are able to bid as one combined entity in the auction, their combined resources may have the effect of suppressing meaningful competition.”
The FCC has called upon auction stakeholders to offer constructive feedback on the proposal.
Earlier this month, the Wall Street Journal reported that Sprint Corp and T-Mobile US, the nation’s third and fourth-largest mobile operators respectively, were considering raising US$10bn and forming a joint venture to bid for 600 MHz spectrum as they continue to discuss a possible merger.
According to the report, the JV would be used if parents Softbank and Deutsche Telekom agree to combine the operators within the next few weeks and the transaction’s regulatory review – expected to be lengthy – is still ongoing when the 2015 frequency sale takes place.
However, French challenger Iliad’s surprise US$15bn cash offer for T-Mobile US late last week could prove a game changer. While the US$33 per share offer is much lower than Sprint’s reported US$40 per share bid, analysts have generally agreed the Sprint deal is more likely to be blocked by regulators than allowed.
New Street Research analyst Russell Waller said in a memo last week that T-Mobile and Deutsche Telekom would have to decide whether the regulatory certainty associated with Iliad’s offer would offset the lower price.
The spectrum auction is designed to use market forces to transfer 600 MHz spectrum from broadcasters to mobile operators. The low-band frequencies are considered ‘beachfront property’ by telcos as they are ideal for deploying LTE.
The FCC has said it will reserve up to 30 MHz of spectrum in the 600 MHz auction for “providers that currently hold less than 1/3 of suitable and available low-band spectrum in a licence area”. This would favour Sprint and T-Mobile.
However, the FCC said the rule was based on the current market structure meaning and therefore could change if the operators decided to merge.
The US’ first and second largest mobile operators are Verizon Wireless and AT&T Mobility.
