U.S. gets $16.9 billion in airwave-license
auction
SD slant on this. GSM in SD?
(Global System for Mobile Communications (GSM), the international standard for digital wireless communications.
voicestream.com
By Jennifer Davies
UNION-TRIBUNE STAFF WRITER
January 27, 2001
The U.S. government garnered $16.9 billion yesterday in the nation's most
lucrative auction of airwave licenses, as wireless carriers compete to expand
phone and mobile-Internet services.
The Federal Communications Commission, which conducted the auction, said
Verizon Wireless snagged more than a quarter of the 422 licenses, pledging
$8.78 billion for rights to the airwaves.
Verizon's 113 new licenses include the coveted and expensive New York
City and Boston markets, where the population places great demand for both
cell-phone service and the nascent "wireless Web."
"The No. 1 thing consumers can hope to get out of this is better coverage,
less busy signals, less dropped calls," said Eddie Hold, an industry analyst.
Through affiliates, AT&T Wireless and Cingular Wireless came in second and
third in the bidding, respectively.
Alaska Native Wireless, which is aligned with AT&T Wireless, bid $2.89
billion for 44 licenses, including ones in New York City and Los Angeles.
Salmon PCS, an affiliate of Cingular Wireless, won 79 new licenses for $2.35
billion.
Cingular is the newly launched joint venture between BellSouth Corp. and
SBC Communications Inc. that encompassed Pacific Bell Wireless.
While many of the winners represented a Who's-Who of the wireless world,
San Diego-based Leap Wireless captured 22 new licenses for a relatively
modest price tag of $350 million. Leap's reach now extends to Columbus,
Ohio; Houston and San Antonio, Texas; and a number of smaller markets.
Dan Pegg, senior vice president of Leap Wireless, said the company was
delighted with its showing, both for the markets it gained and for the price it
paid.
Tavis McCourt, an analyst who covers Leap for Morgan Keegan, said the
company got more bang for its buck than many of the larger carriers. Leap
was able to gain access to more than 22 million potential customers for less
than $16 per person, he said.
The FCC's wireless auction, which began Dec. 12, was seen as a boon to
carriers intent on improving coverage and providing next-generation products
such as wireless Internet service.
Hold, who watches the wireless world for Current Analysis, said carriers
need the added airwaves to begin to deliver on the much-hyped promise of
wireless data service, such as real-time e-mail.
"The wireless Internet is going to suck up a lot of bandwidth, so this is really
going to help in finally bringing it to market," Hold said.
Despite the need, many were surprised by how much money the auction
netted.
"What it says to me is the U.S. market for mobile telephony services is still
very strong," Tom Sugrue, head of the FCC's wireless bureau, told Reuters.
But not all industry watchers experienced sticker shock.
"As far as valuations paid, $16.9 billion, that's kind of in the middle of
expectations of a $15-to-$20 billion range," Peter Friedland, an analyst with
WR Hambrecht & Co, told Reuters.
Many industry watchers expected lower price tags, in part because the
auction originally had been aimed at start-up carriers. But through affiliates,
many of the heavy-hitters were able to gain entree into the auction.
As a result, airwave licenses in metropolis markets, such as New York City
and Los Angeles, grabbed big money. Verizon, for example, tendered offers
of more than $4 billion for two licenses in New York.
The eye-popping prices forced some firms to drop out, such as Nextel
Communications Inc. and Alltel Corp.
Companies squeezed out of the auction can challenge the validity of the
winning bidders, though one analyst said such fights are not likely to succeed.
Another legal challenge that could face most of the winners is from NextWave
Telecom Inc. The company founded by Allen Salmasi, a former Qualcomm
executive, in San Diego and moved to Hawthorne, N.Y. in 1998 -- had many
of its licenses sold in the auction.
The company won the licenses during a 1996 auction for $4.7 billion but lost
them because of nonpayment. NextWave has appealed to a federal court,
which will hear the case in March. If successful, NextWave would regain its
licenses. Representatives from NextWave did not respond to requests for
comment.
As for San Diego, three licenses were up for auction. The successful bidders
were DCC PCS Inc., which is connected to AT&T Wireless; Cellco
Partnership, which has ties to Verizon; and Cook Inlet, an affiliate of
VoiceStream Wireless.
Hold said the addition of VoiceStream to San Diego's cell-phone scene might
signal good news for consumers.
"VoiceStream is known for its aggressive pricing," Hold explained. "If they
end up entering the market, San Diegans are going to enjoy greater choice."
Currently, San Diego is served by Sprint PCS, AT&T Wireless, the newly
launched Cingular Wireless and Verizon. VoiceStream representatives did not
return calls about the company's plans in San Diego.
Leap Wireless also made a play for a slice of San Diego's spectrum, but in the
end it became too-expensive a proposition, said Pegg.
Pegg said it was more important for Leap to add cities that fit better with its
Cricket package, which offers one-rate, all-you-can-talk service.
"From Houston to San Antonio up to Dayton, Ohio, we picked up a lot of
markets," he said.
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