The AWS spectrum auction goes on

The AWS spectrum auction is continuing with the remaining players showing no sign of giving up.

Today, June 18, is the sixth day running under Stage 3 rules. It started with high bids totaling $3.8 billion.

There were eight 20-minute rounds scheduled today, with only 40-minute breaks in between. The last session ends at 4:20 p.m. Eastern time. On Thursday the rounds will be cut to 15 minutes each.

UPDATE: Wednesday marked a definite slowing in the bidding, which for the past several days has averaged $10 million a round. Today’s opening session, round 78, started modestly with 58 bidders adding just over $5.3 million in high bids, followed by sessions of $6.2 million, just under $7.3 million, $6.5 million and $5.6 million in additional high bids. Round 83, which ended at 2:20 p.m., continued this trend by going up $6.46 million, followed by a round of $6.2 million. The day ended with a round of $5.9 million.

Tuesday’s first session, round 70, saw high bids inching up $13.1 million. There were 68 new bids in the round, 63 of which were new high bids. Participants bid up another $11.6 million in Round 71 and $8.5 million in round 72.

But in round 73, although there were 79 new bids, the amount of high bids actually dropped by some $88 million after Globalive withdrew its $96.6 million bid for a 10Mhz piece of spectrum over Montreal. It had been swapping high bids for that licence with Quebecor since round 23. Quebecor held it for five rounds Monday with a bid of $92.8 million, then surrendered it this morning to Globalive which bid $3.8 million more, before withdrawing the bid.

In the next session, round 74, Quebecor snatched it back with a $96.6 million bid, thus making the total high bids on the session leap by almost $88.5 million. However, there were only 49 new bids the entire session, noticeably fewer than most recent rounds. Thus energized, participants came back in round 75 to put down $27 million more from 75 new bids.

For those trying to make sense of what the new entrants are doing, at the end of last FridayGlobalive had the largest number of high bids, 41, followed by Bragg Communications (which does business as the Maritimes’ Eastlink Cable), with 25, Alberta’s Shaw Communications with 19, Videotron owner Quebecor with 16 and DAVE (Data & Audio Visual Enterprises Wireless) with 10.

But by the end of Monday, there had been a dramatic change as bidders apparently are trying to deny Globalive coast-to-coast holdings. Bragg had the biggest number of high bids (30), followed by Quebecor and Shaw (23) and then Globalive dropping to 22. In dollar terms, though, Globalive had the top high bids, $564,608,317, followed by Quebecor’s $ 436,595,000. By Tuesday afternoon Globalive had moved back up to 42 high bids.

However, not all spectrum is equal. For example, Globalive’s high bid spectrum at the end of Monday would have covered 30 million people across a number of provinces, whereas the four high bids held a consortium lead by Montreal investment firm Novacap cover some 17 million people, including 10 Mhz “G” blocks southern Ontario and Quebec. But two of those blocks are apparently so undesirable Novacap has held the high bids on them for days, without the price changing. DAVE’s high bid spectrum would have covered 17 million. Bragg, looking to focus on the less populated Maritimes and small communities Eastlink services, covers 10 million people.

The differences in licence value is because the spectrum is largely divided into 20 Mhz and 10 Mhz slices across the country. The 20 Mhz pieces are more desirable – and therefore valuable – because a provider will need fewer towers for coverage. Also, 20 Mhz spectrum has more capacity. Also, the “G” block has a narrower frequency and is therefore worth less than all of the other blocks. Essentially, auction players have to decide whether they want to spend on licences now or on infrastructure later.

Here’s the overall picture:

Rogers Communications had the high bids on the overwhelming majority of 20Mhz licences covering major cities. Here and there new entrants Globalive Wireless, Bragg Communications and Shaw have top bids in this block. However, they and the other new entrants mainly hold top bids on the 20Mhz province-wide and 10Mhz local licences.

Globalive, for example is trying to keep high bids on licences across the nation: On the desirable 20Mhz southern Ontario licence as well as the 20Mhz licence for Eastern Quebec, 10Mhz licences for British Columbia, Alberta, Eastern Quebec, Northern Quebec, Northern Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Cape Breton, Newfoundland and Labrador as well as for the cities of Winnipeg, Brandon, Manitoba., Thunder Bay, Ont. and Ontario’s cottage country.

Globalive is a consortium is backed by Toronto’s Yak Communications, a long-distance and VoIP reseller with partners including wealthy Egyption wireless and Iceland tycoons.

It’s biggest competitor is the consortium called DAVE, headed by Toronto satellite radio mogul John Bitove and also including former Microsoft co-founder and billionaire Paul Allen. It is trying to hold onto the 10Mhz licences for Southern Ontario, Vancouver, Ottawa, Calgary, Edmonton and Red Deer, Alta., among other places.

Alberta’s Shaw Communications is focusing on the Western provinces, and Bragg Communications, as previously mention, is trying to concentrate on the Maritimes. Similarly, Quebecor, which owns cableco Videotron, has concentrated most of its high bids in Quebec. But it is also fighting to keep the top bid on a 10Mhz slice of Toronto spectrum, which could give it negotiating power after the auction closes and wheeling and dealing between the new entrants is allowed.

The auction is being held under complex rules set by Industry Canada to accomplish several goals, including keeping the pressure on to raise bids. The amount of each bid is also set by the department.

Here’s one wrinkle: A round ends either when time runs out or no new bids are entered, so more than one company can submit identical high bids for a licence by the time a round ends. If so, a computer randomly chooses the winner and the next round starts and the process keeps going until there’s only one high bid per licence. An end to bidding activity doesn’t necessarily end the auction. A bidder can use a “pro-active” waiver to keep the game alive.

Eventually, however, the players will have had enough and the standing high bidders will be the provisional winners. They’ll have to submit eligibility documents showing their companies – particularly those with foreign ownership – comply with government ownership rules.

Ten days after the auction closes the winners will have to put down 20 per cent of their bids, with the rest due 20 days later.

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