Posted by: Olga Kharif on January 23, 2008
Last Friday might have marked the largest single-day market capitalization drop for telecom carriers in history, per Blair Levin, an analyst with Stifel, Nicolaus & Co. Since the beginning of the year, AT&T lost $34.5 billion of its capitalization, and Verizon — $17 billion. Search giant Google lost more than 15% of its capitalization since New Year’s.
These dizzying drops could carry huge implications for a wireless auction due to start tomorrow, Levin says in a note that came out this morning. All these companies have been planning to bid billions in this auction, called Auction 73. But having lost a significant chunk of their value, they may be unwilling to bid as much as they’d intended previously, says Levin.
That means that there’s a chance that minimim prices the Federal Communications Commission (FCC) that’s conducting the auction has set for the spectrum will not be met, and there might be a re-auction later in the year. “If the reserve is not met, the most likely scenario is that the FCC will continue with the course it set for itself when it set the auction rules: lower the reserve price, eliminate or soften the conditions, and re-auction the spectrum. This would allow bidders to obtain spectrum licenses for lower values and on better terms, particularly with more lenient build-out requirements,” he writes.