Press Release

November 05, 2014 — NEW YORK–(BUSINESS WIRE)–Acquiring scarce spectrum resources is an important strategic key for many wireless operators and the upcoming advanced wireless services-3 (AWS-3) auction scheduled for Nov. 13, 2014 will allow for gains that could help bolster long-term strategy, according to Fitch Ratings. The U.S. Federal Communications Commission (FCC) has conducted auctions of licenses for spectrum since 1994 that are open to any eligible company or individual that submits an application and upfront payment and found to be a qualified bidder by the FCC.

We estimate auction participants could bid up to $18 billion including $14.0 billion-$17.2 billion for 50 MHz of paired AWS-3 licenses. T-Mobile U.S. Inc. (T-Mobile) and Dish Network (DISH) are key wildcards that could drive spectrum prices to the upper end of the estimated range or beyond depending on their level of interest. Sprint Corp.[?] will not participate in the AWS-3 auction but is expected to bid in the upcoming broadcast incentive auction in 2016.

Fitch believes Verizon Wireless, AT&T Mobility, and T-Mobile have material financial flexibility within their credit profiles to acquire spectrum in the upcoming AWS-3 and TV broadcast auctions. Both Verizon Wireless and AT&T Mobility could spend $12 billion-$16 billion before pressuring the ratings. T-Mobile raised $3 billion of debt in anticipation of the auction. Fitch expects DISH, which has substantial flexibility, may acquire less spectrum if valuations are high and may have more interest in the lower value, uplink spectrum.

The bidding strategy of which blocks will be targeted by Verizon Wireless, AT&T Mobility, DISH, and T-Mobile is unclear but Fitch believes winning bidders will likely target at least 20 MHz of spectrum or 10×10 MHz channel blocks in numerous key markets. One other factor that could affect bidding considerations and make the AWS-3 band more attractive is its potential as a global 4G roaming band with other counties following the U.S lead in auctioning AWS-3 spectrum for wireless broadband.

Importantly, the AWS-3 downlink or 2155 MHz-2180 MHz spectrum is free of government users and generally available after licenses are granted. The uplink spectrum, 1755 MHz-1780 MHz currently contains federal users. The FCC expects 92% of the uplink MHz POPs will be available 5.5 years after the auction. Licensees that desire to deploy in the remaining protection zones in an accelerated timeframe could likely share spectrum through coordinated efforts. Consequently, depending on the operator, the AWS-3 downlink could be deployed first as downlink only spectrum using supplemental downlink technology to increase the effective size of the downlink wireless pipe. Key gaiting factors for AWS-3 deployment will depend on development timeframes for long-term evolution standard body approval and chipset, infrastructure, and device suppliers.

Additional information is available on www.fitchratings.com.

Press Release

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