WASHINGTON -(Dow Jones)- Companies participating in an auction of wireless licenses increased their bids to almost US$10.3 billion on Wednesday, with cable providers bidding against cellphone companies as rising prices prompted satellite broadcasters to drop out.
The Federal Communications Commission is auctioning off 1,122 licenses for spectrum that can be used to provide wireless services. The spectrum, currently used by the military and law enforcement, will help wireless carriers upgrade their services and other companies to get into new business lines.
Cable companies are in an intense competition with wireless companies. For example, a partnership that includes cable giants Time Warner and Comcast has been in a bidding war with a unit of Cingular Wireless for a license in Boston. The war has boosted the price for the license to $14 million so far, with Cingular, which is jointly owned by AT&T and BellSouth, currently leading the bidding.
"For now, traditional wireless carriers are beating back hefty bids from cable entrants but just barely," Jessica Zufolo, a telecommunications analyst for Medley Global Advisors LLC, wrote in a report. "As the bidding war between wireless and cable intensifies, the price for each license continues to push upward."
T-Mobile USA, a unit of Deutsche Telekom, is in a tough spot because it lacks capacity to upgrade its network to run a new generation of services, while its three bigger rivals have such capacity. If T-Mobile wants to keep pace with the other wireless carriers, it will have to bid aggressively. So far, T-Mobile has the winning bids for some 77 licenses, at a total cost of more than $3 billion.
Already, rising prices are prompting some companies to back off. On Wednesday, a team of satellite companies comprised of EchoStar Communications and DirectTV Group dropped out of the auction after bidding for licenses in New York, San Francisco, Alaska, and regions including the Southeast.
Other companies are showing signs of retreat. In the 16th round, Verizon Wireless bid almost $1.34 billion for a license covering a large swatch of the Northeast. By the end of the 20th round, the bid hadn't been surpassed, raising the possibility that Verizon Wireless, a joint venture between Verizon Communications and Vodafone Group will emerge the winner for that license.
The auction began on Aug. 9 and will conclude when the bidding stops.
- By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; Siobhan.Hughes@dowjones.com
(Roger Cheng contributed to this report.)
(END) Dow Jones Newswires "
Posted to the site on 17th August 2006
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