AWS spectrum auction reaches a $4 billion high

The AWS (advanced wireless services) spectrum auction has grown past $4 billion in high bids, a level which no industry or financial analyst had predicted before the game began 25 days ago.

The mark was reached during Monday’s 111th round, when participants added another $19.748 million in high bids for the 292 available licences.

The auction continues today with 10 15-minute rounds separated by half-hour breaks, a pace Industry Canada set June 11 perhaps hoping to separate the wheat from the chaff. Instead the total has merely climbed.

UPDATE: Friday’s first session, round 146, started strongly with just over $19 million in high bids., followed by rounds of $3.8 million, $2.9 million and $2.7 million.

The auction is scheduled to continue next week, with only a break for Canada Day.

Thursday’s first session, round 136, began with Bell Mobility withdrawing $15. 2 million in high bids, including $9.9 million on 20Mhz of spectrum over Barrie, Ont., $1.67 million for 20Mhz spectrum in the Stratford, Ont., area and just over $1 million for the Cornwall, Ont. area.

Barrie is at the edge of Toronto cottage country, which accounts for the value of this licence. Bell had held the high bid on this licence since round 121 two days ago before giving it up. Cornwall is on Highway 401 between Toronto and Montreal, a route drivers want to keep within signal range. As soon as Bell withdrew its $1.67 million bid, Rogers Communications topped it with a $1.74 million bid.

In the following round, in which $15.8 million in high bids were added, Rogers held all three. The next session pushed bids up $3.1 million, after which there were rounds of $2.4 million and $1.9 million.

In round 141, Globalive withdrew $39.9 million in high bids, including $26 million on a 10Mhz licence for the Ottawa area it held since June 17, and $10.7 million on the 20Mhz spectrum for Regina. Two rounds later no one had submitted a bid on the Ottawa-area licence, while SaskTel, and then Rogers, made high bids for the Regina spectrum.

By the end of the to-ing and fro-ing Thursday, bidders had pushed the total number of high bids up just over $17.6 million.

The growing total has astonished telecommunications consultant Eamon Hoey, who wonders if new entrants can afford the level. “Is this supportable?” he asked in an interview, noting that the annual revenues for the wireless industry are about $10 billion.

“Are we creating a situation similar to the Europeans, who paid so much a few years ago for their 3G licences they were unable to exploit the opportunities?” On the other hand, he acknowledged that incumbents Bell Mobility, Rogers Communications and Telus hold most of the really high bids.

Bell Mobility has held the 20Mhz “F” spectrum for Toronto with a high bid of $314 million for some time, the most expensive licence in the country in this or any previous auction.

Still, newcomer Globablive Wireless – backed by wealthy foreign telcos – is willing to pay at least $279 million alone for a 20MHz licence covering southern Ontario, part of the $428 million in high bids it holds. Quebecor, owner of Quebec’s Videotron cable company, has $582 million in high bids.

By comparison, Rogers had high bids yesterday of about $877 million.

Generally, the rounds for the past few days have averaged $5.1 million in new high bids, but here and there are spurts, as if participants are eager to show they won’t be intimidated.

Some, however, have indicated the price is too high for some licences by withdrawing bids, while others have pulled bids back in a game of chicken, trying to determine how serious an opponent is.

One example was the moves Monday by Bragg Communications, a Nova Scotia-based cable company which does business under the Eastlink, Persona and Amtelecom names. During round 109 it withdrew over $40 million in high bids.

The biggest withdrawals were $11.4 million on the 20Mhz “A” block and $12 million 10Mhz “F” block pieces of spectrum, both covering its heartland mainland Nova Scotia, and $9.2 million on 20Mhz “A” block spectrum covering Barrie, Ont., which is on the edge of Toronto cottage country. A number of Toronto commuters also live in Barrie. As a result, that round showed negative $25 million in bidding overall.

The “A” block spectrum of largely city-wide 20 Mhz licences can be bid on by both incumbents and new entrants, such as Bragg. But it has been dominated by Rogers Communications, suggesting new entrants can’t afford the prices in this block. Many new entrants are sticking to the lower-priced 20 Mhz and 10 Mhz spectrum in blocks where they have exclusivity. Bragg, for example, has held the 10Mhz “D” block covering Barrie, at a high bid of $2.64 million, for two weeks. Meanwhile Telus had held the 10Mhz Barrie spectrum in the “E” block, with a high bid in round 109, of $3.9 million, for a number of days, while Bell Mobility has held the 20Mzh Barrie spectrum in the “F” block almost since the auction’s fifth day. At the time of round 109 it had a high bid of $14.8 million on that licence.

So was Bragg in trouble or bluffing? Consider that after pulling its $9.2 million high bid on the Barrie “A” spectrum, Rogers took it at that price. But the next round Bragg got it back by pushing up the price to $9.6 million.

Similarly, after Rogers took its spot atop the 20Mhz “A” spectrum over mainland Nova Scotia for two rounds, Bragg – which held the licence with a bid of $11.4 million earlier in the day – came back to take the high bid from Rogers with $12.4 million.

However, the next round Bell swiped it away with a bid of $12.9 million.

By and large the fighting over the major licences – Toronto, Montreal, Vancouver, Calgary, Edmonton, and the southern parts of Ontario, Quebec and B.C. – is ocver. These a spectrum that run in the hundreds of millions of dollars. Much of the action in the past few days, therefore, has been among new entrants trying to stop Quebecor from getting a stranglehold on spectrum in Quebec and on tryin to shore up other desired holdings.

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