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.

 

 

 

 

Newsletter

Often interesting

Latest issue

 Gig LTE & Massive MIMO ushering in the Age of Wireless Abundance

Wireless Abundance is here: What the new tech means http://bit.ly/Wirelessabundance
Sprint & T-Mobile Charge to be 1st in U.S. to Gig LTE bit.ly/STMOgig  AT&T bit.ly/ATTGIG2016
Kitahara of Softbank “I am crazy about Massive MIMO” http://bit.ly/MMIMOCrazy
20 Gig mmWave, Massive MIMO & Gig LTE at the Huawei MBBF http://bit.ly/Huawei20
LTE gets to the gigabit explained for non-engineers http://bit.ly/GigLteexplained
Massive MIMO explained. http://bit.ly/WHMassiveMIMO
2017's Big Gigabit story: Qualcomm 835 is ready http://bit.ly/BigGigLTE
Doubling speed with 4x4 MIMO & 256 QAM at T-Mobile http://bit.ly/2k1gEOQ
Netgear Nighthawk M1, Telstra do "gigabit class" LTE http://bit.ly/2k1s5Gq
Spectrum price down by half http://bit.ly/Spectrumhalfoff
Dish and the telcos see big asset cut http://bit.ly/auctionlosers
Shorts on 3GPP,  NYU research, Ralph de la Vega, 5G new radio

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5GW News

dave right5G? 4G? Whatever the name, wireless is going to a gigabit, soon.  I've reported broadband since 1999 and now is the time for gigabit wireless. Catch a mistake or have news? Email me please. Dave Burstein

 

Stories worth writing

Starry may match Verizon 5G at half the cost
OFCOM in UK: Share all spectrum, even licensed
OFCOM's Boccardi: 26 GHz worldwide: U.S. goes 28 
Verizon 5G fixed tests will be only 100's of homes
Massive MIMO FD at China Uni, Tele, Huawei, ZTE

 

 

 

Datapoints

Verizon and AT&T burying price increases in fees. 

Huawei's Richard Yu intends to pass both Apple & Samsung in smartphones in five years. 

The 3,000,000,000 transistor Qualcomm 835 is a revolution. Gig LTE, incredible cameras, better VR & AR, & ... State of the art CPU, DSL, GPU, ISP tightly integrated

1,000 T-Mobile small cells 2016, 6,000 more coming. Tech Life

New $84 Reliance Lyf Wind 7S has a 5" screen, a quad-core Snapdragon, an 8 megapixel camera, and some extras. Not state of the art, perhaps, but completely usable at a modest price. 

Orange/FT 4G covers 97% of Poland, 96% of Moldova, but only 84% in France, Q3 2016. They have 113.5 mobile customers in Africa compared to 25.5M in Europe.

more

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