C-Band Auction Strategy & Analysis
Spectrum decisions can have a profound impact on coverage, capacity, user experience, and ultimately network cost; all of which are determining factors of market share. With the recent T-Mobile + Sprint merger and the completion of the CBRS auction attention shifts to C-Band.
Prior to the T-Mobile + Sprint merger both Verizon and AT&T had led T-Mobile with 115MHz and 150MHz of nationwide spectrum. With the closing of the merger, T-Mobile had amassed ~300MHz of spectrum thanks in large part to Sprint’s increasingly valuable 2.5GHz spectrum. The CBRS auction offered the first of several opportunities for Verizon and AT&T to partially close the spectrum gap.
For those of you keeping score, below is a brief recap from our MNO & Cable Co summaries published earlier:
AT&T with 150MHz of nationwide spectrum was absent from the CBRS auction
Verizon entered the auction with 115MHz of nationwide spectrum spending $1.9B to cover 143M people or 46% of the US population with an average of 3.5 licenses per county.
Comcast entered the CBRS auction with 10MHz in the 600MHz band covering key markets including NY, SF, and Chicago. At the end of the auction Comcast had spent $459M to acquire licenses across 306 counties covering 100M people with an average of 3.1 licenses per county.
Charter acquired 210 licenses across 106 counties at a price of $474M. Their CBRS spectrum licenses cover 74M people with an average depth of 2.0 licenses per county.
Cox paid $212M for licenses in 173 counties covering ~33M people or 10% of the population.
Heading into the auction Dish held ~100MHz of nationwide spectrum. Dish paid$913M to acquire licenses across 3,128 counties covering 309M people or 98% of population with an average depth of 1.8 licenses per county.
On December 8th, 2020, the FCC will auction off 280MHz of C-band spectrum (3.7 – 3.98 GHz). This auction will consist of 14 20MHz sub-blocks in each of 406 available PEAs. Available spectrum blocks are outlined below:
A Block: 100MHz from 3.7–3.8 GHz in five 20MHz sub-blocks:
B Block: 100 MHz from 3.8–3.9 GHz in five 20MHz sub-blocks
C Block: 80MHz from 3.9–3.98 GHz in four 20MHz
Guard Band: 20MHz at 3980–4000 MHz; will not be available for auction
In contrast to the CBRS auction which offered 3,128 countywide licenses; C-Band licenses will be awarded across 406 PEAs.
This plot shows the starting bid price in $/MHz/POP for each PEA
The shift to significantly larger license areas coupled with an expected higher price per MHz saw the number of applications drop from 348 for CBRS to 74 for C-Band. As an example, the opening bid for a C-Band license in Los Angeles, California is ~$11.6M compared to $1.96M for CBRS.
This plot shows the minimum bid price per carrier for each PEA
Despite, fewer bidders multiple analysts expect the auction to generate between $26B and $77B in revenue. A few publicly available estimates below:
Chart shows a range of estimates for C-Band revenue
As with any auction there are a wide range of variables as well as several possible outcomes. On the low end of the range we can look at the results of CBRS to create a potential floor. At an average of $.22/MHz/Pop for CBRS we can assume that C-Band should easily exceed a value of $20B. However, CBRS licenses are power limited to 47dBm at 10MHz or 50dBm at 20MHz; compared C-Band transmitting at 60dBm for 20MHz. This additional 10dB can easily translate into 4x the data rates. In reality, power will be limited by site type and inter-site distance.
For an upper limit we look at the balance sheets of the largest bidders and believe a range of $50 to $60 billion is possible. However, based on recent M&A activity we believe several entities may have other strategic priorities for their use of cash, likely limiting the upper range of bidding. Below is an excerpt from our estimate of available funds for C-Band. The table below shows funds available for Verizon; similar tables have been built for each major operator.
Table above shows Verizon’s available funds based on cash on hand and debt capacity based on a Debt-to-EBITDA ratio of ~3. Verizon recently spent $1.9B in the CBRS auction and $6.25Bc cash and stock deal ($3.125B in cash and $3.125 in stock).
Recent M&A activity:
Clearly there are a wide range of possibilities, but it’s not how much you pay but what you get that really matters.
Digital Twin Sim has taken our geodemographic data including age, income, population density and combined it with spectrum holdings, availability of broadband to develop operator specific bidding strategies.
As there are a number of combinations possible in terms of operators willingness to pay, their spectrum needs & bidding strategy. We have used Monte-Carlo simulations to determine likely results for each PEA. This gives us a range of results on per PEA bases.
Distribution of $/MHz/POP for the first 10 PEA
Simulated total bid price per PEA starting from minimum bid to the final bid price.
Simulated $/MHz/Pop per PEA starting from minimum bid to the final bid price. Large PEAs like Los Angeles and New York have a lower $/MHz/Pop, but the absolute amount required to acquire a license is very high.
If you are interested in leveraging any of our research and/or models please contact us below.
The opinions expressed in this case study are based on publicly available information and do not claim to represent any companies views or strategy.