- UScellular is selling its 850 MHz spectrum licenses, as well as a handful of AWS and PCS licenses, to Verizon for $1 billion
- That leaves 3.4 billion MHz POPs of low and mid-band spectrum up for grabs
- The value of the remaining spectrum is estimated at $3.2 billion
Now that UScellular announced its intent to sell $1 billion worth of spectrum licenses to Verizon – and 30% of the company’s spectrum portfolio already appears headed to T-Mobile – the big question is: Who’s going to buy the rest of the UScellular’s licenses?
The entire portfolio of retained spectrum in UScellular's hands is worth about $3.2 billion, according to New Street Research (NSR) analysts.
Verizon is picking up all 663 million MHz POPs of UScellular’s low-band 850 MHz spectrum, along with 11 million MHz POPs of AWS and 19 million MHz POPs of PCS spectrum. Two other mobile network operators are buying a total of 12 million MHz POPs of UScellular’s spectrum licenses across Citizens Broadband Radio Services (CBRS), C-band and 700 MHz B/C block bands, but UScellular didn’t identify those buyers – even though there are only a handful in the category.
POPs refers to the population covered by the licenses and Verizon clearly is buying a lot more 850 MHz than AWS or PCS. The 850 MHz markets that Verizon is buying are in rural areas that are important for coverage but not so much for capacity, said Brian Goemmer, founder of spectrum analytics firm Spektrum Metrics.
“All in all, it’s a good thing for Verizon because both AT&T and Verizon need to expand their low-band 5G offerings and this gives Verizon clear spectrum,” he told Fierce. “The unfortunate thing for Verizon is there isn’t a major city in any of these markets.”
The spectrum that remains in UScellular’s hands represent 3.4 billion MHz POPs of low and mid-band spectrum: 700 MHz, 3.45 GHz, CBRS and C-band, as well as 17.2 billion MHz POPs of millimeter wave (mmWave) spectrum. UScellular is still looking for buyers of all that spectrum.
Here’s a look at the potential buyers of the rest of UScellular’s spectrum. Spoiler alert: AT&T’s name comes up more than once.
700 MHz
T-Mobile’s proposed acquisition of UScellular’s assets include 700 MHz A-block spectrum, which T-Mobile says it can put to use almost immediately after closing the deal – and at virtually no cost because these holdings are in spectrum bands supported by existing radios.
Goemmer said the remaining 700 MHz in UScellular’s portfolio most likely will end up with AT&T based on AT&T’s current 700 MHz holdings and its ties to FirstNet, the national public safety network that uses AT&T’s network. When AT&T won the FirstNet contract, it also obtained access to FirstNet’s 20 MHz of 700 MHz low-band spectrum, aka Band 14.
NSR estimates the value of UScellular’s remaining 700 MHz licenses at $526 million.
3.45 GHz
The likely bidder of UScellular’s remaining 3.45 GHz licenses is again, AT&T, because Verizon currently doesn’t use 3.45 GHz and T-Mobile recently struck a deal to sell the last of its 3.45 GHz to Columbia Capital. Dish/EchoStar bought 3.45 GHz licenses, but its balance sheet suggests it's more likely a seller than a buyer.
Goemmer said it’s possible that Columbia Capital might be interested in buying UScellular’s remaining 3.45 GHz licenses, with the expectation that the spectrum screen/ownership rules change and it can sell it to AT&T. As it stands, the FCC limits the amount of spectrum any one carrier can hold in a given geographical area.
And NSR analysts note that Columbia Capital is good at these transactions, recently doubling their money on the sale of 600 MHz licenses to T-Mobile. They value the remaining UScellular 3.45 GHz licenses at $867 million.
CBRS
The entity or entities most likely to end up with UScellular’s CBRS licenses are harder to guess because they’re in rather obscure areas.
Take Iowa, for example. UScellular’s CBRS licenses don’t connect to any of the major highway intersections that symbolize population centers. Instead, they’re in highly remote areas, which may be something that appeals to an entity like John Deere, Goemmer suggested.
AT&T has spoken mostly negatively about CBRS at its current power levels, so it’s hard to see where it would be in a position to buy any. Cable companies showed up to buy CBRS Priority Access Licenses (PALs) at auction in 2020, so it’s possible they might be interested.
NSR values the remaining CBRS licenses at $14 million.
C-band
Verizon acquired by far the most spectrum in the C-band auction, ending up with 160 MHz nationwide and a $53 billion price tag with clearing costs. AT&T is the second largest holder of C-band, spending about $27.4 billion with closing costs for about half as much C-band as what Verizon acquired.
That clearly puts AT&T in a position to add more, Goemmer said. Whether it has an appetite for more is another question, but it’s the most obvious contender.
NSR values UScellular's remaining portfolio of C-band licenses at $1.45 billion.
mmWave
Who would buy the mmWave? Some financial analysts have assigned it zero value due to poor propagation. NSR assigns a value of $275 million for UScellular's remaining 28 GHz and 37/39 GHz licenses.
“I think it’s too early” to talk about who might be interested in it, said Bill Ho, principal analyst at 556 Ventures. “It’s not desirable. Nobody’s buying that because the tech isn’t there yet.”
That said, academics and some regulators talk about using even higher spectrum – Terahertz – for 6G, and every big carrier has some mmWave in their portfolio. In the long run, “I think everybody is going have millimeter wave,” Ho said.
Spectrum changes value over time
One thing about spectrum and its valuation is it can change dramatically over the course of a decade or two. Twenty years ago, the 2.5 GHz spectrum that’s now in T-Mobile’s hands was worth “absolutely zero, and difficult to make usable,” said Omar Jaffrey, founder of the private equity firm Palistar Capital.
“But technology moves along,” he said. “If you think decades, all of it is valuable and usable, as the world is deeply short in supply of spectrum.” That said, Jaffrey himself has not invested in spectrum directly because, as an investor, “I don’t have decades.”
However, wireless carriers need to think in decades. And rather than the “three-layer cake” of spectrum that T-Mobile often talks about, they might really need something more akin to a 14-layer spectrum cake, according to Jaffrey.