Could the C-band auction set the price T-Mobile will pay for EBS licenses?

T-Mobile’s purchase of Educational Broadcast Service (EBS) spectrum in 2022 helped it to own more of its treasured 2.5 GHz spectrum. But the carrier still has numerous leases of EBS spectrum with schools around the country. And according to Spektrum Metrics analyst Brian Goemmer, the price that carriers paid for C-band spectrum might provide a good benchmark for the value of EBS spectrum owned by those schools.

T-Mobile’s 2.5 GHz spectrum is comprised of both EBS spectrum, which was traditionally owned by educational institutions, along with Broadband Radio Service (BRS) spectrum, which T-Mobile has traditionally owned outright. The carrier leases a significant portion of its EBS spectrum from the schools that own it. But those leases won’t go on forever, and it’s assumed that T-Mobile would like to convert those leases to owned licenses.

In July 2019, the FCC released a report and order that provided a pathway for T-Mobile and others to purchase EBS spectrum.

Goemmer wrote that if T-Mobile controlled every EBS and BRS license in every county, its national population weighted average spectrum depth in the 2.5 GHz band would be 194 MHz. Thus, any amount below 194 MHz represents another licensee’s ownership or lease of the spectrum.

After the EBS Auction 108 was completed, T-Mobile’s total 2.5 GHz spectrum rose from roughly 164 MHz to 180 MHz. This means that about 14 MHz of nationally weighted 2.5 GHz spectrum is still controlled by other carriers and schools.

T-Mobile is battling with a spectrum investment company — WCO Spectrum — which has been reaching out to schools with offers to buy their spectrum. T-Mobile is adamantly opposed to WCO Spectrum becoming its landlord, and in fact has filed a lawsuit against WCO.

T-Mobile probably wants to buy the EBS spectrum that it currently leases from schools. “They may have a desire to own 100% of the EBS, but they still have to come to an agreement,” said Goemmer. “There will be EBS licensees that won’t sell.”

He speculates that T-Mobile might want to acquire the spectrum that it leases on a rolling basis as those leases expire. “It’s a wise way to push out the capital costs,” he said.

But WCO is throwing a monkey wrench into that possible strategy.

“The other interesting challenge would be that the C-band auction is really the first thing that has put a true market value on the EBS spectrum,” said Goemmer.

He said the EBS spectrum, which was originally purchased by Sprint, cost about $.33 per MHz/POP. He said T-Mobile could make the argument that the EBS spectrum is worth between $.33 and $1. But he said, “I argue EBS provides greater coverage than C-band.” And he said C-band spectrum sold for $.68 per MHz/POP on a national average basis.

“We now have a benchmark and now truly have a value that can be translated to EBS,” said Goemmer. “Prior to that, there wasn’t a line that said what that spectrum might be worth.”

He did note that the $.68 number is a national average, and the value of EBS spectrum in a remote rural area will be cheaper than in a highly populated urban area.