(The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Refiles to correct link formatting.)
By Jennifer Saba
NEW YORK, March 21 (Reuters Breakingviews) - The end of one auction will kick off another – in dealmaking. The U.S. Federal Communications Commission’s spectrum sale is finishing soon, lifting the quiet period imposed on wireless firms like T-Mobile US. Combine the growing confidence of easing regulation with the rapid convergence of media, and the conditions are right for more corporate matchmaking.
The FCC is acting as the middleman in a two-part process to free up some airwaves for wireless broadband use. Broadcasters like Twenty-First Century Fox relinquish rights to some spectrum for money, while telecom, cable and satellite distributors such as AT&T, Comcast and Dish bid for more capacity. The auction, which cleared some $20 billion, is expected to wrap up by May, giving manacled bidders freer hands.
Meanwhile, the regulatory environment since Donald Trump won the presidential election has taken on a more merger-friendly vibe. One indicator of the sentiment is the gap between Time Warner’s share price and AT&T’s takeover bid. When the $85 billion deal was first announced in October, Time Warner's stock traded some 20 percent below the offer price. That discount has narrowed to about 9 percent.
Researchers at Barclays reckon smartphone and broadband penetration in the United States have reached around 80 percent and 60 percent, respectively. Consequently, distributors like AT&T are looking to layer services on to their empty pipes to wring more revenue out of customers.
That puts pressure on Verizon Communications, AT&T's archrival, to think bigger than buying internet brand AOL and soon-to-be-acquired Yahoo businesses. The phone company could look at acquiring Charter Communications, which recently swallowed Time Warner Cable, spectrum-rich satellite provider Dish or even a media company like CBS, should the price be tempting enough to the controlling Redstone family.
Japan's SoftBank, which owns more than 80 percent of debt-laden mobile carrier Sprint, has indicated it will yield control if it can merge with T-Mobile US to better compete with AT&T and Verizon. T-Mobile, the U.S. arm of Germany's telephone giant Deutsche Telekom run by John Legere, has gained more subscribers over Sprint and has other potential suitors including Dish and Comcast.
Still, there's at least one drawback to give dealhunters pause. Media stocks aren't cheap, having rallied nearly 20 percent since November, beating the S&P 500 Index’s 11 percent rise. But if past profligacy is prologue, it will probably take more to dampen the animal spirits of American media masters.
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- The Federal Communications Commission broadcast incentive auction is coming to a close. The final rounds of bidding, known as the assignment phase, are scheduled to conclude on March 30. The auction for spectrum began on March, 29, 2016.
- In the two-part process, U.S. broadcasters relinquish some of their spectrum for wireless broadband use. Broadcasters’ winning payments totaled more than $10 billion, while gross revenue from wireless bidders tallied almost $20 billion. After the collection of certain fees the remaining amount is given to taxpayers.
- Bidders are still in a quiet period, which prevents parties from talking to each other. This is expected to be lifted by early May, when applications and down payments are due for wireless licenses.
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(Editing by Rob Cox and Martin Langfield)