The securities research unit says the FCC incentive auction of broadcast spectrum is likely heading into more stages after the opening day forward auction in Stage 1 yielded just $8.5 billion in bids. The FCC needs $88.5 billion to cover the offers it made to broadcasters for the spectrum on the block and to cover associated administrative costs. “We still stick with our original analysis, which says that the forward auction will ultimately net anywhere between $27 billion and 38 billion,” it says.
With only $8.5 billion in bids from wireless carriers in the opening round of the FCC’s forward auction of TV spectrum yesterday, the auction will likely fall far short of the $88.4 billion that the FCC needs to make good on the tentative offers it made to broadcasters to buy their spectrum in the reverse auction in June and to cover other associated costs, Wells Fargo Securities says in a memo to clients this morning.
“We don’t see how this incentive auction will come in at more than double the AWS-3 auction,” the memo says. The AWS-3 auction of non-broadcast spectrum early this year yielded $45 billion.
“We still stick with our original analysis, which says that the forward auction will ultimately net anywhere between $27 billion and 38 billion,” the memo says, adding that that will happen in Stage 4 with a clearing target of 84 Mhz.
A “stage,” in FCC parlance, means both sides of the two-sided incentive auction — the reverse auction in which the FCC tentatively buys channels from willing station owners and a forward auction in which the agency will sell the channels to wireless carriers.
The FCC will keep conducting stages until the what it agrees to pay broadcasters for a certain amount of spectrum matches up with what wireless carriers are willing to pay for it. In each stage, the spectrum the FCC seeks would go down.