AH Primetime: Do Sprint And T-mobile Really Have A Disadvantage In The Upcoming 600 MHz Auction?

April 18, 2014 - Written By Justin Diaz

Everyone knows that ATT and Verizon are the major players when it comes to the U.S. wireless industry. They have the biggest budgets, they have the most customers, and quite understandably they garner the most attention. They have ownership largely of the majority of spectrum between the two of them, and T-mobile and Sprint  are largely perceived as not having enough cash flow to dispense and outbid the two larger carriers for spectrum that can further their own technology. Yes it is true that both Verizon and ATT both have more money to throw around, but that factor shouldn’t automatically count out T-Mobile and Sprint. T-Mobile despite being the smallest of the nations four largest carriers, has been able to accomplish gains in the industry and single handedly change things up to the point that demanded a response in change from the other three carriers. Is T-Mobile really at that much of a disadvantage? Big Magenta is a huge advocate for the auction limits being imposed, possibly being the most in favor of them to be put in place, but someone has to ask if having spectrum auction limits is really what the wireless industry needs. If the limits were put in place, the regulations would basically seek to determine a cap on how much spectrum could be scooped up by any one group, and the reason Verizon and ATT buy some of the Spectrum licenses that they do is largely in part because they can afford the licensing fees. If the limits are there, some of the spectrum is prone to the possibility of being left alone because the smaller regional carriers wouldn’t have the capital to buy up the licenses, which equals less money spent at the auction, which means spectrum goes unused.

Despite not having quite near the same bankroll of the two largest carriers in the U.S., T-mobile has still been able to turn a profit and advance their network. Speed and coverage has been vastly improved over the last few years, and this is coming from someone who has been a subscriber of their service for the better part of a decade and has seen the changes that the service has taken on. They have been able to do all of this without being able to purchase as much spectrum as the big boys. It is true that if Sprint and T-mobile had more spectrum to deploy, they would potentially have the opportunity to reach more consumers, but both seem to be doing just fine despite the perception of setbacks. Sprint has been focusing most of its efforts on rolling out its 4G-LTE network with Sprint Spark, but they too have made an argument for the imposition of auction limits which they feel would better the chances for other smaller networks, including themselves, to buy up spectrum and use it accordingly. Their argument is the same as T-Mobiles, that they simply can’t compete with Verizon or ATT when it comes to throwing down cash for spectrum. However they apparently have the capital to attempt a buyout of T-Mobile, and one could argue that they could just as easily use that money to buy spectrum once the 2015 auction takes place.

If their main concern is spectrum, and their plan is to buy T-Mobile to get it, why not divert that money directly towards spectrum in the first place? It could potentially take the same amount of time if not more to wait for approvals and complete the acquisition of T-Mobile to gain ownership of that spectrum, as it would to just wait for the auction and bid on the spectrum that’s already available when that time comes. Softbank-Sprint’s owner-also has an extremely large stake of ownership in online retailer Alibaba, which it seeks to gain a huge amount of money from once the company takes things public. In addition to the money they already have to put towards the T-mobile deal, Sprint could end up with plenty more that would allow them more than enough to place healthy bids for spectrum come time for the auction. In the end, no one can argue that Sprint and T-Mobile have a smaller cash flow to spend on spectrum that can be further used for network advancements, but is that really an issue in the first place? In the last auction, both Verizon and ATT bought most of the spectrum that was available, and yet here we are more than 5 years later T-Mobile and Sprint are both still standing. If the regulations aren’t put in place, Verizon and ATT will likely buy up the majority of spectrum in the auction again, and in the end both Sprint and T-Mobile will probably have to end up innovating like they did this time around. Verizon and ATT may have most of the money, but with the changes that T-Mobile had to make with what it had at its disposal has caused things to change so much that it opened up the industry for heavy competition, and plan prices have gotten better just about everywhere, which surely makes customers happy to spend more money, which should end with the carriers making more profit.