OM Malik is one of my favorite bloggers. He generally writes about the technology industry with a focus on telecoms and the Internet. Today he covered news of Verizon Wireless and Google jockeying for position prior to the American 700 MHz spectrum auctions coming in January. It’s clear that both sides believe that much is on the line.
From Verizon Wireless’ perspective they must have at least 2 objectives in winning the auction. First, to acquire more spectrum to expand their existing business. They’d prefer additional nationwide spectrum. But I’d expect them to hedge that bet by selectively bidding for regional licenses.
Second, they can hope to eliminate a competitor, or at least reduce the scope across which a competitor might compete with Verizon Wireless. Both are clearly worth billions. Trailing 12 month revenue for Verizon Wireless is $91 billion. If a competitor or competitors could deny Verizon Wireless as little as 10 percent of that market it makes the cost of licenses pale by comparison.
A lost opportunity of $10 billion/ year has a net present value of around $25 billion. If that represented the cost of doing nothing, spending $10-12 billion to buy more spectrum seems like a way to save $15-13 billion. I count on Verizon Wireless to go all out before the auctions and to bid ferociously during them.
This show is only starting folks. don’t touch that dial.