The US telecoms industry has rounded on Charlie Ergen after he emerged as one of the biggest bidders in a record-breaking auction of government-owned spectrum that raised $44.9bn for the US taxpayer.
AT&T, the country’s second-largest mobile telecoms group, and T-Mobile US, the number four player, said it was unfair that the founder of Dish had been able to buy $13.3bn worth of spectrum because the company does not offer wireless services to consumers.
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- US spectrum auction raises record $44.9bn
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“Given the demands being placed on wireless networks today, the industry simply cannot afford to have significant spectrum resources sitting idle on the sidelines,” said Joan Marsh, AT&T’s vice-president of federal regulatory, on a company blog.
“Auctions should be designed to ensure that licences go to those willing to deploy networks — not speculators or stockpilers.”
Mr Ergen has been acquiring spectrum through Dish and a handful of other companies since 2007, and controls about 15 per cent of industry capacity. This is despite the fact that he neither owns a wireless network nor has any clear plans to build one.
Some analysts estimate Mr Ergen’s treasure trove of airwaves to be worth in excess of $50bn. They believe telecoms companies must find a way of buying or leasing the airwaves, which some fear are becoming increasingly scarce.
Ms Marsh’s comments echoed a similar blog post in which John Legere, chief executive of T-Mobile, said the Federal Communications Commission’s rules had “actually allowed companies that don’t provide wireless service at all to buy up huge amounts of spectrum and sit on it for 10 years”.
However, on an earnings call last week Mr Legere also signalled T-Mobile was open to a partnership with Dish. “I look at the spectrum portfolio and the video content . . . that Dish [has] as a fascinating idea to consider . . . Dish is a great opportunity for both the country and perhaps T-Mobile,” he said.
Mr Legere saved his strongest criticism for AT&T and Verizon, which spent $18.9bn and $10.3bn respectively in the auction, proving, he said, that “they can, and will, dig into their deep pockets to corner the market on available spectrum at nearly any cost”.
The war of words comes as telecoms companies try to shape the rules ahead of an even bigger auction of spectrum as early as next year, when the government is expected to sell the last remaining commercially-useful airwaves.
T-Mobile and Sprint, the number three player, are calling on the FCC to set aside a portion of the spectrum for them so they can mount a stronger challenge to the dominance of AT&T and Verizon, who together account for 72 per cent of industry revenue.
“The rules need to promote competition by reserving at least half of the available spectrum in the next auction for sale to the competition,” Mr Legere said, adding that the FCC should ensure “valuable spectrum is actually used to provide service to consumers rather than allowing it to be collected and traded like financial securities.”
Mr Legere accused AT&T and Verizon of trying to delay the next auction, “supposedly so they can restock their coffers”. Both have taken on lots of debt in recent years to fund huge acquisitions.
In 2013, Verizon tapped the bond markets for $49bn, the largest corporate bond sale in history, to help fund the $130bn it spent buying UK telecoms group Vodafone out of their US joint venture.
AT&T is trying to turn itself from a company reliant on US mobile customers for about three-quarters of its revenues to a group that derives most of its sales by selling video to consumers and services to business. To that end it is acquiring DirectTV, the satellite TV group, for $48.5bn.
It is also spending $4bn buying Mexican wireless assets as part of a push to challenge the dominance of telecoms billionaire Carlos Slim.
Moody’s, the credit rating agency, recently downgraded AT&T’s debt, warning its dividend — one of the highest in the Dow Jones Industrial Average — would “prove unsustainable in the long term”.
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