Analysis: T-Mobile could face crush of competition in crucial U.S. airwaves auction

Tue Feb 16, 2016 12:39pm EST
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By Malathi Nayak

NEW YORK (Reuters) - A few months ago, T-Mobile US Inc looked set to dominate a race for airwaves reserved for smaller, emerging players in an upcoming U.S. auction, a feat that would help it compete with U.S. wireless heavyweights Verizon Communications and AT&T Inc.

In part of a low-frequency airwaves auction, which includes spectrum set aside for non-dominant carriers, No.3 U.S. wireless player T-Mobile was the only major bidder in sight.

But new competitors for the spectrum are surfacing, which could dash T-Mobile’s chances of acquiring enough spectrum at a price it can afford. Its executives have called the auction a "game changer," as it plans to expand the reach of its network to better compete with bigger rivals.

Silicon Valley, cable companies and financial players have signaled interest in the auction, which starts in March and features the broadest array of potential bidders since at least 2008.

"Where it was T-Mobile as the 600 pound gorilla and a bunch of monkeys, the gorilla wins. But now you have orangutans and some other large apes in the fight," said Recon Analytics analyst Roger Entner. T-Mobile is expected to pay more for the reserved spectrum in the face of tighter competition, analysts said.

The U.S. Federal Communications Commission's auction involves selling valuable low-frequency airwaves taken from TV broadcasters who do not require them anymore to companies who want to build new wireless networks or improve their existing coverage.

The auction is expected to be the last for several years of such airwaves, which can carry signals over long distances and penetrate obstacles such as buildings.

From "connected cars to drones, the coverage qualities of the spectrum make it ideal for technology companies," said Lawrence Chu, managing director at investment bank Moelis & Co, and previously a special advisor to the FCC on the upcoming auction.   Continued...

People pass by a T-Mobile store in the Brooklyn borough of New York June 4, 2015. REUTERS/Brendan McDermid