Nearly a year after it began, the major auction in the US has been concluded: T-Mobile US was able to secure important spectrum in the two-stage procedure.
T-Mobile US purchased rights to 31 MHz nationwide on average and will pay approximately $7.99 billion to the US government in exchange. The auction attracted total bids of more than $19 billion, of which $10 billion will be paid to the TV stations that originally owned the spectrum.
T-Mobile was able to secure 45 percent of the spectrum sold. Over the course of the auction, analysts had predicted that T-Mobile US would spend $8 billion, but incorrectly estimated the amount of spectrum the company would obtain. Now it shows that T-Mobile US was able to win significantly more spectrum than expected without investing additional money.
"With this spectrum, we have further fuel to continue the skyrocketing growth at T-Mobile US," said Tim Höttges, CEO of Deutsche Telekom, about the results. "Our strategy ahead of and during the auction was very successful. Our customers will benefit from these investments."
The spectrum auction of the sought-after frequencies in the 600 MHz band involved airwaves formerly used by TV stations. In a two-stage procedure, the Federal Communications Commission (FCC), comparable to the German Bundesnetzagentur, first purchased the frequencies from the television broadcasters. After this first part of the auction, the various regional and national frequencies were re-sorted to enable their effective use by mobile carriers. In the second part of the auction, these rearranged frequency packages were auctioned among the nearly 100 registered bidders.
In contrast to most European countries, in US spectrum auctions buyers gain permanent ownership of the frequencies in question. They just have to renew their licenses for a small administrational fee. In Germany, however, licenses are only valid for a certain period of time. As a result, wireless spectrum in the US has much different value prospects than in Europe, because companies can buy and sell it. T-Mobile US has taken advantage of this and purchased or swapped spectrum from competitors many times in the past in order to optimize its spectrum position.
Just five years ago, T-Mobile US hardly had any low-band spectrum at all: in 2012, the two market leaders Verizon and AT&T together controlled 74 percent of available low-band spectrum and Sprint owned another 12 percent; T-Mobile US had just two percent of the frequencies in this range. The greater reach of these long wave frequencies make them especially suitable for improving coverage within buildings and in rural areas. Without low-band spectrum, it would be impossible to cover many regions of the U.S. economically. The greater reach of the frequencies means much fewer cell towers have to be set up, in contrast to using high-band frequencies.
With this new spectrum, T-Mobile US can expand its LTE network coverage and further improve service quality. T-Mobile US had already nearly equaled Verizon, the market leader, in the number of people in the U.S. covered with LTE by the end of 2016. T-Mobile US had already passed its competitors in terms of network speed.