It should never come as a surprise when mobile operators or their advocates say spectrum prices are too high. That is the case in South America, GSMA says.
Licensed spectrum has been a fundamental prerequisite for being in the business, is a major cost element and therefore affects retail pricing.
In the future, such considerations, while still important, will coexist with business models using unlicensed spectrum, shared spectrum and aggregated spectrum. Significantly, the available amount of commercially-usable spectrum will grow by orders of magnitude.
Where today a mobile operator often has less than 100 MHz of total spectrum, and operators even in the largest countries might have only hundreds of megaHertz, in the future each service provider might have access to thousands of MegaHertz. Also, other techniques such as use of small cells will amplify the usefulness of any amount of physical spectrum.
AT&T, for example, now holds spectrum licenses worth more than $91 billion, estimates Goldman Sachs analyst Brett Feldman, while the value of Verizon’s spectrum is $79.4 billion.
The current equity value of all AT&T stock is about $176.5 billion, implying that spectrum alone represents 51.6 percent of AT&T’s total equity value.
Verizon’s market value is $207.9 billion, implying that Verizon’s spectrum represents 38 percent of total valuation.
Bloomberg Intelligence has estimated the total value of Sprint’s 2.5-GHz spectrum alone at $115.1, about 2.4 times Sprint’s enterprise value of $48 billion.
The large point is that the cost of spectrum has been a major cost for mobile operators. Though that reliance on licensed spectrum will remain, the cost per unit should fall, going forward. There is simply going to be so much new supply, while small cell architectures will allow abundant spectrum reuse.
Also, unlicensed spectrum is going to play a big role.
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