The bids in the Federal Communications Commission's long-anticipated auction of C-band wireless spectrum for 5G are in, and the results are mixed. On the one hand, much more money was spent than even the most optimistic analysts had projected a year ago, which is great news for the taxpayers who will ultimately benefit from that money. On the other hand, the companies that acquired the spectrum are getting treated very differently on Wall Street today.
Investors seem to see the results as positive for T-Mobile US (TMUS 0.32%), whose stock is up a modest 2.8% at 9:50 a.m. EST Thursday, versus declines at competitors AT&T (T -0.27%) and Verizon Communications (VZ -0.51%).
As Barron's reported last night, Verizon was far and away the biggest buyer among wireless telecoms in Wednesday's auction, spending $45.5 billion to acquire 3,511 licenses. Next up was AT&T, spending $23.4 billion for 1,621 licenses.
And T-Mobile anted up just $9.3 billion to flesh out its industry-best 5G coverage with 142 new licenses.
Barron's notes that these companies, and others bidding on the spectrum, will have to pay another $14 billion in compensation to the satellite communications firms giving up the spectrum, to help clear it so that it can be used for 5G.
Barron's concluded that Verizon and AT&T were the winners, coming away with the most licenses at the lowest per-license cost. But choosing the biggest spenders seems a strange way to pick winners.
Indeed, looking at these same numbers, Scotiabank this morning downgraded shares of Verizon based on the huge amount of debt the company must take on to pay for its new licenses. According to S&P Global Market Intelligence data, Verizon went into this auction carrying $150.5 billion in debt. It will come out of it carrying something closer to $200 billion.
And Oppenheimer downgraded Verizon and AT&T, reports TheFly.com, on the theory that both companies had to take on a lot of debt in their attempt to close their 5G quality gap with T-Mobile. AT&T's debt load post-auction should be similar to Verizon's: a bit over $200 billion by my estimates.
But T-Mobile will owe somewhat more than half that at $116.5 billion post-auction. This, in a nutshell, is why its stock is up today.