SoftBank Bid for T-Mobile US Could Reshape Thinking on 600 MHz Auction

SoftBank is in final stages of talks with T-Mobile US parent company Deutsche Telekom about acquiring the U.S.-based wireless carrier, the Nikkei news service reports.

The acquisition, even if agreed to by both SoftBank and Deutsche Telekom, still faces an uphill battle for regulatory and antitrust clearance, many would say. On the other hand, a successful clearance of the merger likely would affect rules for upcoming 600 MHz auctions of former TV broadcast spectrum.

Both Sprint and T-Mobile US have argued for preferential bidding rules designed to allow both companies to acquire more lower-frequency spectrum. A merged Sprint and T-Mobile US should have a weaker argument for such bidding rules.

One big problem for the Federal Communications Commission is the rather complicated process to be used to first clear broadcasters out of spectrum, and then re-auction the cleared spectrum.

The trick is that broadcasters do not have to give up their spectrum. They might do so if the purchase price (with the FCC as the sole buyer) is high enough. But differential bidding rules will lower the value of the spectrum, and therefore tend to depress prices. 

Lower prices make it less likely broadcasters will agree to sell their spectrum. So most observers agree that the highest payments would occur when there are no restrictive rules on the auctioning of spectrum in the follow-on process.

Setting aside blocks of spectrum that AT&T Mobility and Verizon Wireless cannot bid upon therefore make less likely the maximum amount of spectrum can be released. 

A combined Sprint and T-Mobile US would suddenly emerge as a more credible alternative to either AT&T or Verizon, making any set-asides more questionable. 

So the antitrust clearance process might be a bit more complicated than is typical. The U.S. Department of Justice already considers the U.S. mobile market unduly concentrated. 

On the other hand, merger approval might then clear the way to hold an open auction with no set asides, thus making it more likely higher prices would be paid to broadcasters, thereby allowing the FCC to clear the most spectrum for the second stage auctions.