Yesterday we drove down to Washington D.C. for our first virtual event. Now physically, I have gathered all the speakers in one place so that virtually we can stream the event to the interested audience. It is an experiment in the fact that at the end of the day the attendees will have access to the archive of the three hour event. So it’s not exactly a webinar or a video stream and it’s also soon to be a CLE course for telecom lawyers all for the price of $150 or $96 if you enter the code CFW1212 here. After we record the live event, I am going to place it on iTunes, because we all know how much I love Apple.
However, in posting all over the place, we got into an interesting discussion about whether there was any hope for the valuations to be correct for the reverse auction or if the broadcasters are going to price themselves out of the market.
Here are some of the valuation issues:
- It’s very close to the 700 block in terms of spectrum, but not on a national level so from a properties perspective the 700 block spectrum should be a good indicator. However, the D block part of the 700 auction that had requirements for support of local first responder services fell flat in the market. So what was the issue? If the issue was sharing the spectrum then this auction may just be piece part. On the other hand the nationwide deployments need a lot of small cell augmentation and this spectrum may be a good alternative.
- Over valuation. As Congress looks over the fiscal cliff, it makes this auction a revenue win so the government may be over estimating the value for their purposes and then the broadcasters are going to look at those estimates and see it as their final number. So we have double booked the same asset that has “unbridled optimism” at its core.
- Underserved economics. The reality is the sections of the country where the spectrum may be most available is the least likely to get a bid, so we can have an “embarrassment of riches” where the people are sparse and few options where the people are. Oh, and if the spectrum is in the densely populated areas the TV station probably has a loyal base, so migration may be valued by the existing opportunity.
- It may take too long for the stations to migrate. One of the reasons behind the reverse auction is to incentivize the broadcasters to move. Even so, is that a two year plan? Past migrations have taken over a decade.
So the blue bulb analogy has a problem. I can hear my skeptic friends saying, “You wish it was a blue bulb.”
At the end of the day, the market may not be as robust as we hope. The consolidation of carriers is pretty intense right now and the dynamics are not like they were for massive growth. Now the goal is cost containment as the build outs occur. The bottom line is the valuation is not being based on a hockey stick of projections but a reality of operations.
This will be the second panel at today’s virtual event. Let see who can get the valuation right.
Edited by Stefanie Mosca