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Overheating C-Band Spectrum Bidding Threatens Telecom Fair Values; Cutting Verizon and AT&T FVEs

Analyst Note

| Michael Hodel, CFA |

Bidding in the FCC’s C-Band spectrum auction quickly pushed far past reasonable levels this week, with gross bids roughly tripling since Dec. 18 to reach nearly $70 billion. As a result, bidding has already exceeded 15 times the amount spent at the CBRS auction last summer despite the C-Band auction offering only four times as much capacity albeit with more flexible operating conditions. Heading into the auction, conventional thinking, including ours, held that Verizon would dominate to augment its mid-band spectrum holdings, with AT&T also looking to add to its holdings. A host of other bidders are now involved, though, including T-Mobile, Dish Network, cable companies Comcast and Charter (bidding jointly), and investments funds. At this point, it’s anyone’s guess as to which actors have been driving prices higher and who will ultimately end up holding the bag. Bidding is paused for holiday break until Jan. 4 and may still run for some time before winners are announced. Meanwhile, we raise our expectations for the amounts Verizon and AT&T will spend and cut our fair value estimates to $57 from $59 and $36 from $37, respectively.

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Company Profile

Business Description

Wireless communication remains AT&T's largest business, contributing nearly 40% of revenue. As the second- largest U.S. wireless carrier, AT&T connects more than 100 million devices, including 63 million postpaid and 16 million prepaid phone customers. The consumer and entertainment segment (about 25% of revenue) includes the consumer fixed-line and DirecTV satellite television businesses, serving 20 million television and 14 million Internet access customers. WarnerMedia now contributes a bit less than 20% of revenue with media assets that include HBO, the Turner cable networks, and the Warner Brothers studios. Fixed-line business communications (14%), Latin American satellite television (2%), and Mexican wireless services (1%) constitute the remainder of the firm.

Contact
208 S. Akard Street
Dallas, TX, 75202
T +1 210 821-4105
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2019
Stock Type High Yield
Employees 235,000

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