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AT&T; Makes Major Play in Wireless Bidding

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REUTERS

The second day of bidding in the U.S. auction of airwaves for wireless telephone and data services drew $666.7 million, with AT&T; Corp., through its Alaska Native Wireless partner, making an aggressive play for major markets like Los Angeles and New York.

After four rounds of bidding, Alaska Native topped the bidding with a tally of $433.9 million on Wednesday. It made the highest offers for 11 of the top 15 licenses, according to data provided by the Federal Communications Commission.

The second-highest bidder was DCC PCS, a unit of Dobson Communications Corp., and AT&T; Wireless Group Inc. weighed in with offers of $80.5 million. DCC PCS had high bids in markets such as New York and Chicago in the fourth round.

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Licenses in the large cities continued to attract the highest bids. New York fetched bids of $54.97 million from Alaska Native, DCC PCS, and Verizon Wireless, a joint venture between Verizon Communications and Vodafone Group.

Alaska Wireless bid $36.69 million for one license covering Los Angeles, the second-most-sought-after market, and bid $27.52 million for a second Los Angeles license. 3G PCS also bid $27.52 million for a third Los Angeles license.

In the auction, which began Tuesday, 87 bidders are competing for 422 licenses that will allow them to fill in gaps in their network coverage, improve service in congested markets and launch new products such as wireless data and Internet services.

AT&T;, for example, has been trying to improve service in New York, where it previously suffered from dropped calls and overburdened networks.

“In the last rounds, AT&T; really pushed ahead. But that doesn’t necessarily mean they are going to get those markets. I can’t believe that Cingular isn’t going to make a push,” said Credit Suisse First Boston analyst Cynthia Motz.

Salmon PCS, which is linked to the Cingular Wireless joint venture of BellSouth Corp. and SBC Communications Inc., was eighth in the fourth round of bidding, and Motz said she had expected a more aggressive start.

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Others such as Nextel Communications Inc. also have kept lower profiles in first rounds.

Nextel saw its eligibility reduced by half in the fourth round of bidding. Companies gain “eligibility” to participate in the auction based on the upfront payments and the number of licenses for which they registered to bid.

If companies do not bid in each round, or place bids that are too small, their eligibility to participate down the road is reduced.

Nextel has in the past argued it already has enough spectrum to expand its customer base by four or five times. It may have decided to scale back its auction participation because it may be counting on other airwaves the U.S. government may make available, or it may wait to bid in another auction slated to begin this spring.

“We believe Nextel may be waiting for the 700 megahertz auctions scheduled for March 2001,” said Steven Yanis, an analyst at Banc of America Securities.

The FCC in November proposed rules that would make it easier for companies to trade, as well as sign leases, for licenses covering airwaves that may be going unused in rural and urban areas.

“One of the reasons that Nextel doesn’t feel much pressure to bid is that the federal government had made available additional spectrum that Nextel would be able to use, but that would not be as easily used by other companies,” said Drake Johnstone, an analyst at Davenport & Co.

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“It has a number of different options to get spectrum at a reasonable price,” he added.

Nextel did not return calls seeking comment.

It will take several more rounds before companies’ bidding strategies become clear, analysts said. Companies have shown restraint in the first few rounds and kept bids from escalating too high, too quickly, analysts said.

Many industry analysts have expected the auction to raise at least $16 billion, but others recently ratcheted down their expectations.

The auction will continue until no more bids are received and may last until mid-January.

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