Verizon spends $ 45.5 billion on the best 5G spectrum providers

The results answered a question that has absorbed investors in the wireless industry since the Federal Communications Commission began bidding in December. Purchases of licenses for the use of certain radio waves are among the biggest checks that a mobile operator can write.

Wireless companies have captured larger and larger pieces of the electromagnetic spectrum to keep up with the growing demand of their customers for music, video and software transmitted on their smartphones. A lack of assets can degrade the service, putting a carrier at a competitive disadvantage.

Verizon and its rivals are improving their 5G services this year, following the launch of Apple Inc.

the latest iPhones and other devices that can support high-speed specifications. But Verizon’s need for the midrange was seen as particularly acute after T-Mobile accumulated a sizable cache of similar assets through its 2020 acquisition of Sprint.

Verizon, the nation’s largest subscriber carrier, has concentrated much of its wireless investment on the millimeter-high-frequency spectrum in recent years. These licenses can support even higher internet speeds, but often struggle to transport data remotely.

The commission’s tender rules prevent bidders from commenting on the process for several days. AT&T, Verizon and T-Mobile are scheduled to hold public briefings in March to update investors on their long-term strategies, including their network upgrade goals.

The latest spectrum sale has given cellular companies, cable TV providers and other qualified providers the chance to expand their wireless operations into the C-band, a radio wave band previously restricted to satellite communications. The Commission auctioned off 280 megahertz of bandwidth, leaving the rest of the satellite and security band users to block interference.

Strong demand for 5G-friendly frequencies led to initial auctions of a record $ 80.9 billion. A second phase designed to sort out the types of licenses granted to each bidder totaled $ 81.2 billion last week.

US Cellular Regional Carrier Body.

USM 0.34%

provided $ 1.3 billion for licensing in certain areas. An affiliate of the private equity firm Grain Management spent just under that amount.

Other expected bidders remained largely on the sidelines. An affiliate of Dish Network Corp. bid $ 2.5 million, suggesting that the satellite operator will rely on existing spectrum cache to build a new 5G network from scratch. C&C Wireless Holding Co., a joint venture with cable operators Comcast Body.

and Charter Communications Inc.,

did not win licenses.

Advance payments for spectrum licenses will be made on March 10. The winning bidders will also spend about $ 14 billion more to cover the costs of satellite operators moving their operations to a narrower band of the spectrum.

The promised amounts could have lasting effects on the companies that bought the licenses. AT&T recently contracted a $ 14.7 billion loan for spectrum acquisitions, among other priorities. Verizon on Wednesday ended a $ 25 billion term loan.

Operators will use the proceeds from customers’ mobile phone bills to repay these debts over time. Companies are expected to support the broader benefits that 5G service offers business devices, rather than smartphones, as justification for spending.

“They need to attach some revenue to this huge check I’m writing,” said John Hodulik, an industry analyst at UBS Group. AG

.

Mr. Hodulik said Verizon will discuss in particular the benefits that C-band spectrum offers to its Internet customers at home. Combining airwaves purchased this year with existing high-spectrum holdings could support a service that “could actually be a competitor to cable,” he said.

The latest auction was not the last chance for mobile operators to ensure the average spectrum. Jessica Rosenworcel, the current president of the FCC, proposed this week a plan that will launch another auction for 100 megahertz of similar average spectrum in early October.

Write to Drew FitzGerald at [email protected]