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Tuesday, November 25, 2014 - 03:07

Robert Cyran and Jeffrey Goldfarb discuss the reasoning behind and implications of the unexpectedly high bids - $36 bln and rising - in a U.S. spectrum auction.

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The huge US government auction of mobile spectrum has surprised everyone involved. The bids are now up to 36 billion. More than double whatever I was expecting him to be. What happened here rob Cyril how to get caught off parliament will still unclear of the sitting still ongoing and the prices are going up they keep on rising rising. But it seems they could be a couple of things first it could be first off there are a lot of companies participating with type companies want it in the big four wanted to consolidate they wanted to have deals with T-Mobile and AT&T was turned out that they just apartments I was it's again today falling apart now makes the spectrum is it different don't turn well you have four companies they all need to. I'm secure the long term future and as I demand for mobile devices is increasing that means. These companies all need they're Specter advocates the data across also is huge piece of illustrate exactly so more people have mobile devices but these new devices more intensively and that means they need lots spectrum transmit the data. I'm that there could be something else at play here. Dish network's. Charlie Gergen bought a bunch of spectrum from some pumped Telecom is that went bust. He has to use the spectrum within a few years or has to some kind of government imposes restrictions on this Zune users are losing proposition eight buy it. Fine but they ought to put to him that the public good to have to put it to use. Have a point is he doesn't have enough money probably to bill that is owned networks and things would you can do with all the spectrum pretty kitty on sold to someone sure could be quiet another company. Perhaps. Com well this is sort of all what's going on so that we don't know who's been and we know exact numbers are we don't know it was going to be. But because dish holds all the spectrum have a government spectrum is in value to certain way about dishes. Worth more as a company it's a strange sort of circular argument that dish appears to be bidding aggressively don't know exactly is that we'll know when the options are where they appear to be being aggressive for extra spectrum. And what's that's what's funny is Wall Street analysts are saying well the value of the spectrum is is rising very quickly so therefore. All the spectrum and this is books must be worth a lot more as well. Which is kind of a nice thing even if he can get that sort of are now the point you're making an column you wrote is that. These kinds of auctions ended badly in the past not mean not so long ago either yet it's happened several times in countries like in the Netherlands that happened recently at. And it happened in 2000 in Germany for instance in the UK companies in Germany alone company spent fifty billion dollars to buy the spectrum. And what that meant was the winners the Specter orphans that yes we want the option oh wait we have to develop this now I would have to pay back all these huge loans and borrowings and to cut to finance these kids. So that meant as the company's answer on that one the bids were in financial distress that's in him very much money to develop the spectrum. It it's called the winner's curse that's where. If you have lots of companies bidding for something it's the one that's actually kind of stupid ends up winning and and overpaying Ireland indicates we will wait to see who wins don't show up much more to talk about this auction. We'll be back with more breaking news tomorrow.

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Breakingviews: Upwardly mobile

Tuesday, November 25, 2014 - 03:07