What Happens If The Spectrum Auction Fails?

Wells Fargo analyst Marci Ryvicker addressed the possibility that the Federal Communications Commission's spectrum incentive auction may fail in a note to investors. “The technical definition of auction failure is concluding Stage 9 (42 MHz cleared/ 20 MHz sold) with the Final Stage Rule still having not been met,” she wrote. “According to our math, we are still quite a ways away from this potential outcome. But with the forward auction going backwards in the two most recent stages, we did feel it time to gauge what might happen to our stocks should the previously unthinkable become our reality.” Her overall conclusions:

• We consider a failed auction more of a disappointment than a thesis changer for our broadcast stocks especially in light of a Republican administration.
• Of the three broadcasters most 'exposed' to the auction, we view Sinclair Broadcast Group as the healthiest regardless and would view Tribune Co. as having the most potential downside risk to its stock price. (Media General is in the middle).
• We particularly like Dish Network's scarcity value.
• We think Comcast's risk/reward profile might actually go UP.