An upcoming auction on spectrum for mobile carriers may have more than one bidder after all, which could mean higher profits for the federal government.
In December, the federal government announced a spectrum auction exclusive to new entrants. (Spectrum is the airwaves used for cellular phones.)
None of the major telecoms, like Telus (TSX:T), are eligible to bid in the auction for the AWS-3 spectrum.
As reported this week, it was speculated that it might not be much of an auction, since the only company that was expected to bid for AWS-3 spectrum in B.C., Ontario and Alberta was Wind Mobile, as there was some doubt that Mobilicity could raise the funds needed from its backers. The company is currently in creditor protection.
Mobilicity did not respond to questions last week on whether it planned to bid.
But on Tuesday, Mobilicity announced it had the approval of its backers to bid in the auction, although it will need the court’s approval. The opening bid of $65 million must be posted Friday, said telecom analyst Mark Goldberg.
If there are two bidders, it will mean that the federal government is likely to make more money from the sale of the AWS-3 spectrum than it would if Wind was the only bidder in B.C., Alberta and Ontario, where both Wind and Mobilicity operate.
Under the rules of the single-bid auction, the company that makes the highest bid wins, but does not actually have to pay the amount it bid – it only has to pay the second highest bid.
“The price you pay is what the other guy bids,” Goldberg said.
And if one of the two companies decides not to bid after all, it means that the company that does bid will get the AWS-3 spectrum for about $65 million.
By contrast, a similar auction in the U.S. for AWS spectrum raised “an absolutely breathtaking” $45 billion, Goldberg said.
Goldberg speculates that Mobilicity’s decision to bid is part of an effort to make it more attractive for a potential buyer.
“You have to wonder: Is Mobilicity going to participate in the auction with the intention of using that spectrum, or is it to enhance their value when they’re bought?”
