Everyone wins who doesn't own spectrum.sold auction180 Beneath all the rhetoric, spectrum prices should be coming down around the world. Wireless technology is moving so fast that there just isn't much need for more spectrum. The spectrum price fall in the U.S. and the low bids in India suggest a general trend worldwide, but predicting auctions is very tricky. I've been writing "An Age of Wireless Abundance" for the last two months, but didn't call the auction. Tim Farrar had perspective last fall and a prescient call a month ago.  

John Hodulik's and Craig Moffett's notes this morning showed why they are the best on Wall Street. John wrote, "This brings the broadcaster ask well below our prior expectations for forward auction proceeds." Kudos also to Brett Feldman of Goldman for, "We estimate that the auction will end with just under $18bn of bids, implying a valuation of $0.86/MHz/POP, which is half of our generic ‘low-band’ spectrum value estimate of $1.69." Few in the public eye are frank about mistakes like this, but we all make them. Honest admissions earn respect.

Moffett looked at the implications in the U.S. of prices he expects, "radically lower than recent benchmarks." He concluded, "At $1.00 per MHz-POP, Dish’s shares would be worth about just over a third of their recent trading range." I saw the same thing last night. I'm amazed the price of DISH didn't go down yet as I write this.

Craig went on to discuss what clearly now is a buyer's market for spectrum.

He notes that Verizon has "balance sheet constraints." AT&T's "balance sheet is stretched to the breaking point." Craig has been pointing out how hard they've had to work just to cover their dividends. They continue to raise dividends every year to inflate the stock price, but earnings have been flat to down. Both should be cutting dividends but fear the stock price - and CEO options - would collapse. Both will remain among the most profitable companies in the world for years, but the stock price needs to come down to connect to reality. They are masters of creative accounting, but common sense suggests they should be taking large writeoffs soon on spectrum value. If they don't, they have been undervaluing spectrum for years. The accounting rules are so imprecise they probably haven't broken the law. Telco balance sheets, at least in the U.S., should be considered fiction. The same is true of the absolute level of capex. Steve Levy back in the days of Lehman Brothers compared the reported capex to the visible actual investment costs. About half was unexplained, implying that the telcos were burying operating expenses in capex, raising measures of earnings. For a decade, the top analysts have been tracking company cash flow, because reported earnings are so easy to manipulate.

Also hanging over DISH are "build-out requirements that it simply can’t realistically meet on its own." Some come due in two months. Farrar thinks the $hundreds of million settlement with Straight Path sets a precedent for how to treat DISH. They could, and should, lose spectrum they value in the $billions.  

If the new FCC chair has any courage, they can create a fifth U.S. competitor simply by forcing Charlie Ergen to live up to the terms of his license agreements. I believe making sure we have plenty of competition (and good information) should be the first priority for anyone who believes in "markets." Just getting government out of the way rarely works in capital heavy businesses like telecom. The public actions of likely FCC candidates like Jeff Eisenach and Ajit Pai suggest they disagree. Both are very smart and I believe dedicated to the public interest. If they take strong actions against market power, they will surprise their critics.

 

 

 

 

dave ask

Newsfeed

Samsung has delivered 5G chip samples to BBK's Oppo and Vivo, the #2 or #3 phones manufacturer. Samsung is facing off against Qualcomm in the 5G market. Qualcomm is unfazed and reportedly moving the production of their next chip from TSMC to Samsung. 

Sprint's 2.5 GHz 5G is delivering 100-500 megabit downloads consistently. That bodes well for China Mobile, using the same frequencies.

Vodafone, BT, and soon 3UK are delivering modestly sized 5G mid-band networks. Vodafone is also live in Spain and Italy. 

Sunrise in Switzerland is using 5G mid-band for fixed wireless in rural areas.  

More newsfeed

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Welcome  1,000,000 Koreans bought 5G in the first ten weeks. The demand is there, and most of the technology works. Meanwhile, the hype is unreal. Time for reporting closer to the truth.

The estimates you hear about 5G costs are wildly exaggerated. Verizon is building the most advanced wireless network while reducing capex. Deutsche Telekom and Orange/France Telecom also confirm they won't raise capex.

Massive MIMO in either 4G or "5G" can increase capacity 3X to 7X, including putting 2.3 GHz to 4.2 GHz to use. Carrier Aggregation, 256 QAM, and other tools double and triple that. Verizon sees cost/bit dropping 40% per year.

Cisco & others see traffic growth slowing to 30%/year or less.  I infer overcapacity almost everywhere.  

Believe it or not, 80+% of 5G (mid-band) for several years will be slower than good 4G, which is more developed.