NEW YORK (TheStreet) -- An unexpectedly high level of bidding for a new tranche of wireless spectrum being sold at auction by the Federal Communication Commission is great news for certain stocks.
The demand for spectrum at the Federal Communication Commission's AWS-3 spectrum auction has surpassed analysts' highest estimates. As of now, there have been more than $37.8 billion of spectrum license bids, far more than the $15 billion predicted by telecommunications research firm MoffettNathanson. BTIG research expected the spectrum licenses to sell for $1 per MHz, but they have been selling for more than $1.50per MHz; paired spectrum has been selling for around $2.00 per MHz.
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Those companies that are already sitting on a lot of spectrum are more valuable now. DISH Network (DISH) is the clearest winner as a result of this auction. It is sitting on a mountain of spectrum that now is worth even more than its satellite service. The stock has reflected this valuation upgrade, having risen 30% in the past month and 25% since the auction started on Nov. 13.
We can also conclude from this auction that the wireless business as a whole is even more capital intensive than we thought it was. The primary bidders in this auction are AT&T (T) and Verizon (VZ) . T-Mobile US (TMUS) is the only other major wireless carrier participating, but it's likely just picking up some regional fill-in licenses. What AT&T and Verizon's spectrum spending sprees are telling us is that major wireless carriers have to keep paying for more spectrum to keep their wireless businesses up to date. On top of that, growth in the wireless industry has slowed down from rate-plan competition. The wireless business isn't very profitable right now.
"AT&T (T) and Verizon (VZ) would have to increase revenues on a per subscriber basis by about $1.50 per month for every man, woman, and child in America in order to earn a minimal return over this latest round of spectrum," said Craig Moffett, senior research analyst at MoffettNathanson.