Verizon bids $4bn for licences

date: 24th January 2001, source: ft.com

Verizon Wireless is poised to pay more than $4bn for two mobile licences in its home city of New York, setting a new record for the price paid for wireless spectrum.

The New York bidding has become the centrepiece of a a series of auctions in the US that could end as early as Tuesday with bids totalling nearly $17bn.

The New York bids have pushed prices far higher, on a comparable basis, than was seen in last year's spectrum auctions in the UK and Germany.

The large amounts raised in the European auctions shocked investors and led to a downturn in wireless communications stocks as the financial markets grew concerned at the ability of carriers to recoup licence costs.

Despite that, the red-hot bidding for spectrum in New York has passed largely unnoticed. The different reception reflects the fact that spectrum concentrated in a single city, where Verizon already has a network, is likely to be put to use far more quickly and easily than the nationwide third-generation licences sold in Europe.

With bidding apparently drawing to a close for the 422 licences on offer, Verizon was poised to win licences in the five biggest cities where spectrum was made available.

Besides two of the three licences on offer in New York, the wireless company, which is part-owned by Vodafone of the UK, was in line to win one of three in Los Angeles as well as the sole licences in Chicago, San Francisco and Philadelphia.

The Verizon bids in New York, totalling $4.1bn, would give it an additional 20 megahertz of spectrum covering a region with 18.1m people. On top of the 25 Mhz it already owns in the city, the new licences would leave it with the most allowed under current Federal Communications Commission rules and put it in a commanding position in its home city.

On a comparable basis, the New York bids are nearly three times as high as those made for 3G licences in the UK and Germany. While the European bids were equivalent to $4.08 for each megahertz of spectrum to reach each potential customers, the Verizon's New York bids are equivalent to $11.32.

With licences covering second- and third-tier markets raising far less, however, the overall prices paid in the US auctions are set to fall below the levels seen in Europe.

Verizon, the largest US mobile carrier, has emerged as the largest bidder, with current bids totalling $8.8bn. The second- and third-largest carriers, Cingular and AT&T Wireless, have each bid more than $2bn.

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