Boston, MA 07/16/2014 (wallstreetpr) – Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) are reportedly plotting a joint bid in the upcoming spectrum auction.
According to the people with insider knowledge, the companies are planning to raise about $10 billion for a joint bid. The sources also said that T-Mobile will manage the joint venture to own the newly acquired spectrum if the bid is successful.
A joint venture arrangement to bid for spectrum is expected to help the companies avoiding running into trouble with regulatory rules, especially those that seek to discourage collusion.
The spectrum auction that has been set for next year is expected to attract more bidders that include the giant carriers AT&T Inc. (NYSE:T) and Verizon Communications Inc (NYSE:VZ). AT&T Inc has reportedly earmarked $9 billion for the spectrum bid.
Complex transaction
The wireless airwaves to be auctioned will be acquired by the Federal Communications Commission from television broadcasters and resell the same to wireless carriers. The transaction will involve reverse and forward auctions, which is a complicated process that will be tried for the first time by the FCC.
The forward auction process is expected to fetch at least $30 billion if Verizon makes a bid in the neighborhood of $10 million.
The last spectrum auction was performed in 2008, out of which $19 billion was raised. The proceeds from the upcoming spectrum auction are expected to go into various projects that include creating a nationwide public-safety network.
Leveled playing field
Sprint Corporation (NYSE:S) and its wireless peers are in need of bigger spectrum to help them meet the expanding demand for mobile data. The majority of the wireless airwave is controlled by AT&T and Verizon such that Sprint and T-Mobile have complained to the regulator to change the bidding rules to so as to create a leveled playing field.
A bigger spectrum will be important for the combined company of Sprint and T-Mobile. The companies are discussing a merger. In fact, the $10 billion spectrum bid money is expected to come from the $45 billion merger package that Sprint Corporation (NYSE:S) and T-Mobile (TMUS) are discussing.
