The communications industry now has a better idea of who is — and perhaps more importantly, who is not — participating in the upcoming auctions for millimeter wave spectrum.
The auctions for the 28 GHz and 24 GHz spectrum bands will be the first for high-band spectrum in the U.S. for 5G technology. The wide bands of millimeter wave spectrum will enable operators to carry significantly more traffic at higher speeds, though the spectrum's higher frequencies mean it cannot travel very far and has trouble penetrating various surfaces. Bidding in the 28 GHz auction is set to begin Nov. 14, while bidding for the 24 GHz band will begin immediately after the conclusion of the 28 GHz band auction.
The U.S. Federal Communications Commission released the list of companies that had submitted applications to take part in the auctions. All four leaders in the wireless space — Verizon Communications Inc., AT&T Inc., T-Mobile US Inc. and Sprint Corp. — were among the applicants, as were a couple of pay TV providers, including Cox Communications Inc. and DISH Network Corp. Absent from the list, however, were cable operators Comcast Corp., Charter Communications Inc. and Altice USA Inc.
Though most of the participants were expected, analysts said there were a few surprises. Among them, according to New Street Research analyst Jonathan Chaplin, was DISH, given both its "balance sheet constraints" and its possible interest in M&A.
"DISH registering means they are not close to a deal with any of the other companies that are registered," Chaplin said in an Oct. 10 research note, explaining that the FCC's anti-collusion rules around auctions mean these companies "are effectively restricted from holding M&A talks with each other until the auctions are over.
A major reason for DISH's heavy balance sheet is it already spent $21 billion over 10 years on spectrum purchases and is now facing deadlines for building out a network to put that spectrum to use.
DISH ended the second quarter of 2018 with $15.14 billion in total debt and a debt-to-recurring EBITDA ratio of 5.24x, according to S&P Global Market Intelligence data. By comparison, 10 years ago, DISH ended 2008 with total debt of $5.01 billion and a leverage ratio just over 2x.
"We would be surprised if Dish bid aggressively in this auction based on the depth of its more valuable mid-band spectrum," BTIG analyst Walter Piecyk said in a research blog post.
Another surprise was the absence of Comcast, Charter and Altice given their wireless ambitions. All three companies have mobile virtual network operator agreements, with Comcast and Charter using Verizon, while Altice has a deal with Sprint. Comcast and Charter have already launched their mobile offerings, while Altice USA plans to offer a mobile service in 2019.
In a filing with the FCC earlier this year, Charter said it was "particularly excited" about the opportunities presented by high-band spectrum and was already "exploring how to use it to deliver ultrafast, high capacity services to consumers in communities across the country."
But New Street's Chaplin said the absence of the three cable giants should not be read as a sign that cable operators are backing away from mobile.
"If Comcast and Charter had registered, it would have been supportive of our thesis that they will have a much bigger impact in the wireless market than most expect; however, not registering doesn't demonstrate a lack of commitment to wireless," he said, noting the cable companies have always been more interested in mid-band spectrum.
Piecyk agreed, saying that despite Cox's application to participate in the 24 GHz auction, cable operators in general "have largely been skeptical about the usability of mmWave spectrum."
The BTIG analyst added that a potential spectrum sale from DISH, as well as ongoing efforts to open up mid-band spectrum for wireless use, may all "loom larger on the 5G landscape" than the upcoming high-band spectrum auctions.
Unlike high-band spectrum, mid-band spectrum is better at traveling long distances and penetrating walls. However, much of the mid-band spectrum in the U.S. is already allocated, so the FCC has been working on freeing up select bands and developing spectrum sharing strategies.