McCaw Drops Out of Wireless Phone Bidding : Telecom: He cites escalating amounts for PCS licenses. Twenty firms remain in competition.
Billionaire cellular phone entrepreneur Craig McCaw, whose aggressive bidding in the Federal Communications Commission’s auction of wireless phone licenses had surprised the telecommunications industry, has abruptly dropped out of the contest, saying the bids have gotten too rich.
McCaw’s departure, noted in a brief FCC announcement, leaves 20 bidders remaining in the government’s auction of 99 licenses to provide next-generation mobile communications technology called personal communications service, or PCS. As of Monday, bids totaled $6.9 billion, and some analysts speculated that McCaw’s departure means the auction will quickly draw to a close.
McCaw--flush with nearly $1 billion in AT&T; stock from selling his McCaw Cellular Communications to the long-distance giant last year--had been locked in a vicious bidding war with Pacific Telesis Group over several big-city markets, including the coveted Southern California market.
A PacTel bid of about $300 million for the Southern California license, which includes an area covering Los Angeles, San Diego and parts of Nevada, had stood for weeks until McCaw joined the fray. Bidding quickly escalated and topped out at $493 million this week, making the Southern California license the priciest of the lot.
Analysts and rival bidders say they were not surprised at the departure of McCaw, whose company, ALAACR Communications Inc., has only a handful of employees and is dwarfed by the financial might of telecommunications giants.
“It’s hard to predict when someone is going to drop out . . . but I’m not surprised,” said Joe Woods, executive director of AirTouch Communications Inc. However, Woods said there would have to be a significant number of additional auction dropouts before bidding is halted.
AirTouch, in partnership with regional Bell telephone companies Bell Atlantic Corp., US West Inc. and Nynex Corp., has been an active player in the auctions, as has AT&T;, Pacific Telesis, and a consortium of Sprint Corp. and three large cable TV firms. All view PCS licenses as vital assets in the exploding mobile communications field.
But McCaw’s departure from the PCS contest comes only a month after the Washington Post Co. sold back most of its partnership interest in another PCS bidder, citing the changed “economics of the business.” It also comes as entrenched cellular phone providers unveil improvements that they say will provide nearly the same technological advantages as PCS, namely very small and lightweight transceivers and high-quality data transmission.
McCaw’s bidding tactics were followed closely by telecommunications analysts, who speculated that McCaw was running up prices in order to put AT&T; rivals at a competitive disadvantage.
“Even if McCaw wasn’t successful in winning a PCS license, he was successful in that he had the effect of running up the price of licenses so high that he’s put competitors at a disadvantage,” said Betty Massick-Columbo, a telephone analyst at S. G. Warburg & Co.
But a McCaw spokesman termed that speculation outlandish.
“It’s ludicrous to believe that an extra $100 million in bidding by PacTel is going to have an impact on AT&T;’s stock price,” said a McCaw spokesman.
