The FCC concluded round 15 of Auction 108, also known as the 2.5 GHz auction, with proceeds hitting $170.9 million. Only 1,913 of the 8,017 licenses being auctioned have any competition in the bidding. The vast majority of the licenses, 5,943, have only one bidder.
Perhaps because of the lackluster demand, the FCC is changing the format of the bidding rounds to four one-hour rounds instead of two, two-hour rounds. The new format will start today and the agency said that bidders should have “firm” back-up arrangements for immediate implementation in case they encounter difficulties accessing the FCC’s bidding system.
New Street Research called the demand for 2.5 GHz licenses “abysmal” and said it is cutting its auction proceeds forecast to a maximum of $750 million instead of its original forecast of $3.4 billon. New Street added that this forecast is still conservative and it is possible that the proceeds will be closer to $200 million.
New Street said that it still expects T-Mobile to win substantially all of the licenses and it will probably spend substantially less than anticipated on those licenses because of weak demand.
The weak demand for licenses is also making some wonder if the auction will end much earlier than the mid-September time frame that was projected. New Street said that because of the rapid decline in demand, this is possible but added that auctions procedures are complex so it’s difficult to predict.
Unlike other auctions
The 2.5 GHz auction is dramatically different from other recent auctions because of the lack of demand. In the C-band auction and the 3.45 GHz auction, demand was strong for more than 40 rounds of bidding.
New Street noted that only 20% of the 8,017 licenses in the 2.5 GHz auction are “clean” which means that the license winner can operate in the license geography without worrying about impacting the incumbent operator.
The auction has been referred to as the “T-Mobile auction” because the operator already holds long-term leases on the majority of the incumbent licenses. T-Mobile kept much of the details of its leases confidential so the other bidders don’t know how long they are prohibited from accessing or re-leasing parts of their licenses that are currently encumbered by T-Mobile’s leases.