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C-Band Auction for 5G Airwaves Intensifies With Heavy Bidding

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In a concerted effort to thwart the increased 5G dominance of South Korea and China and bring the United States at the forefront of the 5G race, the FCC is auctioning some of the airwaves in the 3.7 gigahertz-to-4.2 gigahertz area of spectrum — widely known as the C-band. The auction has created quite a buzz among telecom firms and is on track to be the biggest ever spectrum auction in the country, with experts predicting total bids to reach $47 billion, based on the trajectory of bidding.

The much-anticipated Auction 107 is offering 280 megahertz of spectrum in the 3.7-3.98 GHz band that is likely to provide key mid-band spectrum for potential 5G deployments in the next few years. The C-Band offers significant bandwidth with better propagation characteristics compared with mmWave, which has a short range and requires a high density of sites to achieve coverage. Consequently, it is deemed to be a prized asset for carriers that lack considerable mid-band spectrum holdings.

About 57 bidders are participating in the auction that has reportedly fetched almost $34 billion to date, with no signs of slowing down. At a time when the global economy is hard hit by the coronavirus pandemic, the significant interests in the auction signifies that bidders are willing to spend more money on 5G spectrum with solid ROI potential. The auction is widely expected to unlock super-fast 5G networks covering wide swaths of the country, thereby generating healthy revenues that are likely to offset the high auctioning expenses.

The pandemic has further highlighted the need for high-speed, high-bandwidth and low-latency connections — the hallmarks of the 5G network — for digital sustainability. With digital sustainability being the norm of the day, telecom firms have aided countless people with increased 5G deployments as virtual communication replaced in-person exchanges with social distancing and the work-from-home option in vogue. No wonder that more and more firms are increasingly joining this 5G bandwagon and are aiming to outbid rivals to gain an advantage in this evenly contested field. Let us have a brief rundown of some leading firms in the fray.

Verizon Communications Inc. (VZ - Free Report) is likely to benefit from a disciplined network strategy, including accelerated 5G deployment despite economic uncertainties stemming from the COVID-19 crisis. The wireless operator is building the 5G home solution and mobile edge computing on the same network and expects to witness a solid 5G momentum heading into 2021 backed by customer-centric business model and diligent execution of operational plans. Verizon has completed Dynamic Spectrum Sharing (DSS) trial to accelerate the pace of 5G network evolution. The trial underscores Verizon’s commitment to introduce nationwide 5G coverage with the deployment of Ultra Wideband network services by the end of 2020. DSS will help the company to deploy lower-frequency bands, including mid-band and low-band spectrum, to deliver an optimum combination of 5G coverage and speed to its customers.

Verizon has systematically invested in 5G technology to gain a foothold in the industry. However, the company lacks significant presence in the mid-band spectrum, likely forcing it to invest heavily on it with aggressive bidding. This stock expects to capitalize on the continued 5G boom and outsmart competitive pressure. With a VGM Score of B, it has long-term earnings growth expectation of 3.5%. Verizon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

As the first carrier in the industry, AT&T Inc. (T - Free Report) has unveiled its 5G policy framework that hinges on three pillars — mobile 5G, fixed wireless and edge computing. For a seamless transition among Wi-Fi, LTE and 5G services, the company intends to deploy a standards-based nationwide mobile 5G network. Its 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings. It believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices.

AT&T has expanded its 5G network infrastructure in various markets to serve more than 225 million people. The company continues to invest in its wireless and wireline networks to expand coverage and improve connectivity. However, like Verizon it also lacks considerable presence in the mid-band spectrum, thereby making it a potential high bidder in the auction. With a VGM Score of B, this Zacks Rank #4 (Sell) stock has long-term earnings growth expectation of 2.9%.

DISH Network Corporation (DISH - Free Report) reportedly became the fourth major mobile carrier in the country after the blockbuster merger of T-Mobile US, Inc. (TMUS - Free Report) with Sprint and the divesture of some of their assets to it. The company is building is own 5G network and will require heavy investments in the mid-band spectrum to pose challenges to its rivals. Consequently, DISH can emerge as a dark horse in the bidding race to gain sufficient airwaves to strengthen its position in the market. With a VGM Score of A, this Zacks Rank #3 stock has long-term earnings growth expectation of 3.6%.

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