Value of Spectrum is Changing

There are a few new indications that communications spectrum is not worth what sellers are asking, even in an era where wireless networks are vital and when demand for capacity clearly is growing. Already, valuation of some firms with big spectrum assets seems unstable.

In the big 2016 spectrum auctions in India, proceeds were far below expectations, generating about 11 percent of what the government had expected.

Lower perceived value for any new block of spectrum would be a rational response for actors in markets where enormous new supply will be made available, and where technological change means existing resources can be used more productively.

The ability to offload mobile traffic to Wi-Fi networks provides one example. The ability to bond Long Term Evolution 4G spectrum to Wi-Fi provides another example. Huge new spectrum allocations for 5G, dwarfing all prior spectrum allocations, also seems to be a growing factor. In some markets, shared spectrum also is being made available.

Also, mergers and acquisitions in the mobile markets also, by definition, mean that acquirers can get new spectrum as they buy firms with rights to use spectrum. All of those trends, plus developments in small cell architectures and radios, mean that spectrum supply effectively grows substantially. More supply should mean lower prices.

Spectrum--licensed or unlicensed--still is enormously valuable. But what also is clear is that the wisdom of buying spectrum increasingly must be balanced against other methods of adding capacity. And, obviously, buyer perception of value and price also might be changing.