Cable companies looking at AWS spectrum; Sprint Nextel, Alltel to abstain

[Andy]

Cable companies looking at AWS spectrum; Sprint Nextel, Alltel to abstain
By Jeffrey Silva
May 10, 2006
WASHINGTON—The Sprint Nextel Corp.-cable TV joint venture today took the first step toward competing for spectrum at the advanced wireless services auction this summer, a move with implications for the No. 3 mobile phone carrier and cable TV operators as they attempt to strengthen their respective market positions with expanded bundled offerings.

“We are … evaluating whether it would be a good idea to have a more direct interest in wireless spectrum. Accordingly, we, together with our partners in the Sprint Nextel joint venture, are planning to file a short form application at the FCC to participate in an auction of advanced wireless service spectrum, which will start on June 29,” Time Warner Cable stated. “The filing of this application does not obligate Time Warner Cable or other companies to bid in the auction, but it provides us the flexibility to take part should we decide it makes business sense to do so.”
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The AWS short-form application filing deadline is today. A stronger indicator of the ultimate field of AWS applicants will come June 1 when upfront payments for Auction 66 are due.

Last November, Sprint Nextel and four cable companies—Time Warner, Comcast Corp., Cox Communications and Advance/Newhouse Communications—announced their partnership to offer wireless services bundled with cable television, telephone and Internet service. Sprint Nextel and its affiliates serve more than 45 million customers, while the four cable TV companies combined provide service to more than 41 million subscribers.

“We are not going to be considered a telecom carrier. We are going to be considered a company that knows what media services are about,” Sprint Nextel Chief Executive Officer Gary Forsee said at the time.

Cable TV operators, for their part, are anxious to add wireless service to their bundled offerings to remain competitive with large Bell telephone companies. Wireline giants, which want to add video to their package of high-speed Internet, telephone and wireless services, dominate the U.S. mobile phone market.

Time Warner and Sprint Nextel said they are pleased with the partnership so far, and will conduct early market tests later this year.

“If Sprint does not register, too, then it is possible it and its cable friends can maintain active discussions during the AWS auction that could lead to further investment in the joint venture with cable inclusive of [Sprint Nextel’s] huge greenfields 2.5 GHz spectrum position,” said Jim Wiesenberg, a wireless licensee and principal of WW Associates, a spectrum-oriented advisory firm.

It turns out Sprint Nextel has decided against bidding on its own at the AWS auction. “Sprint Nextel is not filing an individual short form to participate in the AWS auction,” said Leigh Horner, a Sprint Nextel spokeswoman.

Sprint Nextel is seen by many analysts as having a strong spectrum position, and following Sprint Corp.’s acquisition of Nextel Communications Inc. last year is set to pick up 10 megahertz of spectrum in the 1.9 GHz band as part of Nextel’s rebanding efforts.

Sprint Nextel is not the only carrier that will forgo the AWS auction. At a conference in Palm Springs, Calif., an Alltel Corp. executive on Tuesday said the Little Rock, Ark.-based mobile phone carrier will not participate in the upcoming AWS auction.

“We’re going to take a pass on that,” said Kevin Beebe, Alltel group president for operations, in response to a question at a meeting of the Rural Cellular Association.

Beebe said that Alltel “didn’t like the split nature” of the 1.7/2.1 GHz paired spectrum bands that will be on the auction block, and that the company believed that there would be “cost challenges” associated with building a green-field network with that spectrum. He went on to say that the way the Federal Communications Commission is poised to sell the spectrum—through blind bidding—also wasn’t to Alltel’s liking.

The Congressional Budge Office estimates the AWS and some smaller auctions could raise $15 billion for the U.S. Treasury. It is unclear whether recent rule changes on blind bidding and small-business bidding discount eligibility—as well as one and possibly additional AWS-related suits—could lower CBO’s revenue projection.

“We have not been advocates of blind bidding rules,” Beebe said. He gave the example that if Alltel was considering buying more spectrum to bolster its operations in Arizona, the company would want to know if other CDMA operators were buying significant amounts of spectrum in nearby markets, such as San Diego, where Arizona customers would commonly roam.

However, another regional CDMA carrier, Leap Wireless International Inc., is bullish about the upcoming AWS auction.

“Based on our evaluation, we believe that the spectrum available in this auction presents attractive prospects for expansion that provide good return potential for the business and, ultimately, our stockholders. Therefore, we plan to participate in the auction, and may do so directly and with third parties, while continuing with the focused strategy and disciplined approach to acquisition we have demonstrated in the past,” said Doug Hutcheson, chief executive officer and president of Leap. “The company intends to take the necessary steps to obtain the liquidity needed to support our participation and we expect to raise funds for the purchase of spectrum in the auction through a mix of completed, committed and contingent capital. We believe that this funding strategy will put the company in a good position to participate in the auction and finance purchases of properties that are attractive to the business to the degree that they are priced at levels consistent with our desired return thresholds.”

Other major mobile phone carriers either could not be immediately be reached for comment or declined to say whether they are filing short-form AWS applications today.


RCR Wireless News reporter Kelly Hill, in Palm Springs, contributed to this report.


http://rcrnews.com/news.cms?newsId=26337

[Fathead]

Not suprised at all that Sprint won't participate, no need there. A little suprirsed at alltel sitting it out.

[Andy]

Originally Posted by Fathead

A little suprirsed at alltel sitting it out.

Same here, Fathead. I guess they don't want to spend the money on spectrum auctions but want to buy out other smaller carriers. Others think that they may be up for grabs sometime soon. I don't think they are since they seem to be doing very well. I also don't want to see them being bought out since they are a very comptetitive carrier and I hope they will expand into new areas.

[bobolito]

Well, Alltel is right about their concerns with cost challenges associated with the 1.7/2.1Ghz band. It would mean that if Alltel wanted to become national, they would have to have their phones custom made to cover both the traditional 850/1900 bands as well as the AWS band. But then again, not participating in this auction condemns Alltel to never be a national competitor on their own, locking themselves out of the larger US markets which is where the money is at. Buying existing carriers is not an option because all current national carriers already have all the standard spectrum in the larger markets and they are not selling it.

[Andy]

Originally Posted by bobolito

Well, Alltel is right about their concerns with cost challenges associated with the 1.7/2.1Ghz band. It would mean that if Alltel wanted to become national, they would have to have their phones custom made to cover both the traditional 850/1900 bands as well as the AWS band. But then again, not participating in this auction condemns Alltel to never be a national competitor on their own, locking themselves out of the larger US markets which is where the money is at. Buying existing carriers is not an option because all current national carriers already have all the standard spectrum in the larger markets and they are not selling it.

You are right that there is a lot of cost associated with getting those 1.7/2.1Ghz licenses, but sooner or later phones may become standard in having the option to use those bands, don't you think? I mean if there is this auction and carriers are going to buy this spectrum then phone manufacturers will need to start building phones capable of supporting those frequencies and if ALLTEL ever wants to roam on any of these carriers' advanced networks which will be at those freqeuncies won't they need to have phones that support those frequencies anyways?
I just think that sooner or later other frequencies will have to become standard additionally to the ones used here already, just like UMTS in Europe is at 2100 Mhz.

And you are right that this will condemn ALLTEL from ever becoming a national player. Honestly, though, in some areas it's already too late for them to join. Take what MetroPCS is trying to do in Southern California...it's impossible to build a quality network there now. ALLTEL would struggle. What if ALLTEL buys carriers like Leap/CricKet who has service in some areas ALLTEL doesn't and already has a good network up and running.

[Dogma]

Originally Posted by Andy84094

ALLTEL would struggle. What if ALLTEL buys carriers like Leap/CricKet who has service in some areas ALLTEL doesn't and already has a good network up and running.

Alltel could possibly buy companies like Leap and US Cellular to get into some major MSA's, but I kind of doubt this will happen. Alltel not getting into this auction is a tell-tale sign they plan on selling off at some point.....not sure if its next year or 5 years from now?

[Fire14]

If Verizon, & Cingular also decided not to bid in the auction, then it would seem like most carriers would boycott the way the FCC setup the spectrum & auction.

I really did think Alltel would go for spectrum in the major area's to become a national carrier, and I thought Nokia or Motorola had already developed a phone for Europe with the 1700 & 2100 Mhz included with the 900/1800?

[bobolito]

If they don't participate in the auction, that leaves T-Mobile to grab all they can at a good price which is a good thing for them. Sprint already decided not to participate. Cingular already has a healthy spectrum portfolio so I don't see why they would want to participate. Verizon could give it a shot since they seem to be a little hungry for more spectrum and they have the money.

[Andy]

Now the question is: Who will buy out ALLTEL then??? I would hate to see ALLTEL disappear and being swallowed by a large national carrier that will just raise prices and not continue major network expansions in rural areas like ALLTEL did.

[bobolito]

If Verizon goes for Alltel, I hope the FCC/DOJ deny it.

[Andy]

I hope they would deny all big 3, not only Verizon.
I have to say, though, that a lot of ALLTEL's footprint would fit perfectly for Verizon.

[MOTOhooligan]

Originally Posted by Andy84094

I have to say, though, that a lot of ALLTEL's footprint would fit perfectly for Verizon.

Which is why they're such good roaming partners, I just don't see Verizon buying Alltel. I think Alltel will stick to what they have been doing, gobbling up smaller, regional and local carriers to build out their network.

Alltel seems content to be the largest Tier 2 carrier in the US and bask in the glory of having the largest physical network in the country... and the roaming revenues that come with it.

At this point Alltel being a 'national' carrier is irrelevant as Alltel National Freedom plans are equivalent to Verizon and Sprint in most respects, so Alltel's customers have the benefits of being 'national.'

I am surprised that they're not participating in the AWS auction, however.

I don't know if Alltel can be bought out by anyone, considering their financial strength and the fact that the regulatory process would probably not approve such a large merger.

I don't think the wireless industry is going to see another merger on the scale of Sprint/Nextel or Cingular/AT&T... of course, I've been wrong before.

[bobolito]

Originally Posted by MOTOhooligan

At this point Alltel being a 'national' carrier is irrelevant as Alltel National Freedom plans are equivalent to Verizon and Sprint in most respects, so Alltel's customers have the benefits of being 'national.'

But the point is that customers in the larger markets won't have an extra competitor and Alltel won't have a chance to grow as much by staying out of the big markets.

[Andy]

Originally Posted by bobolito

But the point is that customers in the larger markets won't have an extra competitor and Alltel won't have a chance to grow as much by staying out of the big markets.

But do you seriously think that if ALLTEL would pay all the money for the airwaves, plus build out those markets they would be able to stay as comptetitive? I'm surprised T-Mobile is still as competitive as they are. Their cheap Family Plans with $9.99 SMS/EMS for all lines is quite attractive.

[Fire14]

Originally Posted by MOTOhooligan

At this point Alltel being a 'national' carrier is irrelevant as Alltel National Freedom plans are equivalent to Verizon and Sprint in most respects, so Alltel's customers have the benefits of being 'national.'

I think that people in area's that Alltel doesn't cover would want to have the choice to go to them, their plans are good as well as their reputation. I know I would like to have them as an option & think they would grow even bigger & better with some of the bigger cities and states in the US.
As for anyone buying them, I also don't see that happening at least for a very long time.

[Matt]

Originally Posted by Andy84094

I'm surprised T-Mobile is still as competitive as they are. Their cheap Family Plans with $9.99 SMS/EMS for all lines is quite attractive.

That offer is over (it might end today). It's $19.99 now.

[Etorres777]

Originally Posted by Dogma

Alltel could possibly buy companies like Leap and US Cellular to get into some major MSA's

Now I have a question. How is it that Leap can go into cities like they do? They just recently came into El Paso, then San Antonio, and now Houston. What stops alltel from doing something like that with other cities?

[Andy]

Originally Posted by Etorres777

Now I have a question. How is it that Leap can go into cities like they do? They just recently came into El Paso, then San Antonio, and now Houston. What stops alltel from doing something like that with other cities?

I would say it's licenses and spectrum. Leap has licenses for those cities that may have either been sitting dead for some time and have just barely started using them or they just got those licenses.