FCC’s Spectrum Opening: Sky No More The Limit

For the past five years, telecommunications CEOs have bellyached about the lack of spectrum available to conduct their rapidly expanding businesses. Two years ago, AT&T Inc. (NYSE: T), the No. 1 telecommunications carrier, launched an ill-fated $39 billion bid for T-Mobile USA on just that premise.

Now some relief is at hand: The U.S. Federal Communications Commission plans to disgorge “a significant tranche” of new and unlicensed spectrum in the 5 gigahertz band starting next month, mainly for Wi-Fi use.

The directive comes from the top: FCC Chairman Julius Genachowski, who spoke at the International Consumer Electronics Show, which closes on Friday in Las Vegas.

Some of the spectrum will come from frequencies reserved for U.S. government agencies, he said, with more from technical upgrades that should enable spectrum available for Wi-Fi to increase 35 percent.

Wi-Fi networks are getting more traffic from smartphones and tablets than ever as some of the big carriers, headed by AT&T, the Verizon Wireless unit of Verizon Communications Inc. (NYSE:VZ) and Sprint-Nextel Corp. (NYSE:S), try to keep their national networks open for voice traffic.

The FCC has managed giant auctions of unused spectrum, raising billions in the process, but always running against the speed with which consumers and business take to mobile applications.

Spectrum is another reason why satellite pioneer Charlie Ergen this week mounted a $5 billion counter-bid for Clearwire Inc. (NASDAQ:CLWR), a national developer of long-term evolution (LTE) networks. Clearwire is 51 percent owned by Sprint, which last month offered to buy out its minority partners, which include Intel (Nasdaq: INTC), the No. 1 chipmaker, for $2.97 a share.

Ergen’s Dish Network (NASDAQ:DISH), of Englewood Village, Colo., offered to pay $3.30 a share for Clearwire. Alternatively, Ergen also said he’d acquire 24 percent of Clearwire’s spectrum for about $2.2 billion.

The bid could potentially upset the $21 billion deal under which Japan’s SoftBank (TYO:9984) wants to acquire 70 percent of Sprint, of Overland Park, Kan., for $21 billion. SoftBank has already bought $3 billion worth of Sprint bonds as a kind of down payment.

Since the counter-bid, shares of all three companies have risen. Clearwire shares closed Thursday at $3.15, up 2 cents, valuing the company at $4.61 billion. They were unchaned Friday afternoon. Dish shares, which might have been expected to plunge, have gained at first but by Friday afternoon, fell 56 cents to $36.40, only $1.52 below their 52-week high..

Sprint shares, on a tear since the SoftBank deal, have also gained, although they fell 2 cents to $5.92 Friday, only 12 cents below their 52-week high.

Analysts suggest Ergen may end up selling his whole company to Sprint, although with a market value of approximately $16.4 billion, that would be unlikely given the SoftBank arrangement.

Sprint’s board said it’s in a strong position as it awaits an official announcement by Clearwire. Still, the tussle proves that spectrum is money, which is exactly why the FCC will likely haul in billions next month.