A research note from Credit Suisse, published on Monday highlighted the potential value of MSS spectrum and suggested it could be worth as much as $0.50 per MHzPOP. It also noted that the spectrum value of Clearwire “is likely underappreciated”. No substantive justification is given for the $0.50 per MHzPOP valuation suggested in the research note, other than the fact that this is close to the median value in the 2006 AWS spectrum auctions, and there are a number of elementary mistakes in the analysis of TerreStar (most notably that no mention is made of the more than $400M of Convertible Preferred Stock which must be repaid before any value from the 1.4GHz spectrum is realized by the equity holders). The fact that the FCC “will expect a portion of the
step up in value for both [2GHz] MSS and broadcast spectrum” is also only mentioned in passing, despite the fact that this will have a huge impact on the realizable value if the spectrum is ultimately included in an incentive auction. Despite this, the research certainly seems to have stimulated some increased interest in MSS-ATC spectrum, as evidenced by the jump in the price of TerreStar’s stock on Monday, and could be seen as potentially helping Harbinger in its quest to attract investors for its 4G network.
However, perhaps coincidentally, last Friday, Business Week published an article highlighting Clearwire’s spectrum value (which it puts at “$20B or more” or $0.50/MHzPOP). In my view, this article clearly indicates that Clearwire is now open to offers for purchase of some of its spectrum. In that case, wireless operators who are looking for spectrum in the short or medium term, such as T-Mobile, would certainly have a viable alternative to MSS-ATC spectrum if they are looking to build out a 4G network. Given that there are only a few potential purchasers of wireless spectrum at the moment (and the it now looks like the FCC doesn’t want AT&T and Verizon to buy any more spectrum in forthcoming auctions), the fact that Clearwire and Harbinger may end up competing to attract one of this limited number of partners won’t do anything to push up the price that can be secured for their spectrum in the near term.