US spectrum auction: cash, or carry on

The Federal Communication Commission has hired boutique company Greenhill & Co to gin up interest in an auction of the 600MHz spectrum band owned by local US broadcast television stations.

The FCC/Greenhill pitchbook puts the value of the spectrum at up to $45bn. Broadcasters, who can tender spectrum voluntarily, have shown limited enthusiasm thus far. Though the sector has wobbled in 2014, TV station companies have had a good run. The local advertising market has been excellent. The fees pay-TV providers pay for local broadcasts have rocketed as well. Executives must now weigh cashing in against continued operation in each of their markets. The scenarios on how the auction unfolds are mind-numbingly complex. But the indicative values, by single market and in aggregate, have served the FCC’s objective of getting TV stations’ attention. Private investors will seek to buy independent operators to then flip them. Wells Fargo says that listed station groups Sinclair and Nexstar, based on FCC numbers, have spectrum values worth half their enterprise values. Marketing documents can exaggerate final deal prices. But that is no excuse for station bosses to simply ignore them.