Nexstar Holding Onto Its Spectrum

While Nexstar CEO Perry Sook continues to keep a close eye on the FCC spectrum auction, he still sees more potential value holding onto spectrum vs. selling.

“We have said realistically that proceeds from the auction could be from $0 to $300 million,” Sook said during Thursday’s conference call to discuss second-quarter financial results. “We just don’t have enough information at this point. Obviously, we will look at it. If we’re able to sell spectrum assets at a premium, we would do that. If we can’t, we won’t.

“Our position on the auction hasn’t changed. We believe the best use of our spectrum would be on a recurring revenue/leasing model rather than selling.”

Nexstar properties tend to be in mid-size to smaller markets, typically where wireless providers’ demand for spectrum is likely to be lower. That translates into lower prices, suggesting Nexstar is more likely to hold onto its spectrum real estate.

Like many broadcasters, Nexstar is paying close attention to spectrum values as the auction approaches in an effort to ensure it maximizes value to shareholders. Sinclair has been a leading proponent of the spectrum-hold model, contending that leasing unused or underused spectrum it retains will generate far greater returns over time than selling.

While Nexstar and Sinclair share a similar perspective on the spectrum auction, they appear to diverge on the issue of long-term vs. typical-term retrans contracts.

“We still believe shorter is better as the market continues to evolve,” Sook said, adding that he doesn’t see particular risk from two- to three-year retrans contracts. In an oft-repeated theme for broadcasters, Nexstar considers the retrans revenues it generates from MVPDs “still below the value proposition we bring to the bundle,” he said.

Retrans “is still the last great secular play for the media bundle and we think it continues for half a dozen years at least,” he said.

If there’s little risk from the standard-term retrans contract, then the so-called skinny bundles that are part of OTT offerings represent little threat, Sook said.

“We believe we are and will continue to be part of any skinny bundles,” he said. “We have seen no material degradation in subscriber counts. We don’t believe the sky is falling. We like our chances in a skinny bundle. We believe we will be on every skinny bundle going forward.”

Finally, don’t be surprised if Nexstar racks up more station buys before year end, Sook said.

Deal activity has slowed significantly as a result of the impending spectrum auction, set to happen no later than the end of the first quarter 2016.

But, Sook noted, “there is activity going on. For those interested, they would probably would want to sell on rumor of the auction rather than news of the auction.”

Nexstar has several letters of interest from prospective sellers, he said.