Anterix on Tuesday announced it would sell around 6MHz of spectrum in the 900MHz band covering 3.6 million people to San Diego Gas & Electric (SDG&E), a subsidiary of utility giant Sempra Energy, for a whopping $50 million.
That price tag signals a number of important elements in the US wireless industry, including the value that utilities are increasingly placing on private wireless LTE networks.
The sum is so high that the financial analysts at B. Riley Securities suggested Anterix's nationwide 900MHz spectrum holdings might be worth more than double – $2.7 billion – the $1.3 billion they had initially calculated.
"Spectrum is a very scarce asset," Anterix CEO Rob Schwartz asserted during a conference call with analysts Tuesday, adding that the new deal "further demonstrates the growing demand for lowband private LTE networks by utilities to solve mission-critical use cases."
A network to prevent wildfires
As noted by FierceWireless, SDG&E is moving forward with an initial LTE deployment with vendor Nokia in its CBRS spectrum holdings in order to evaluate the possibility of a wider private wireless effort. SDG&E was one of almost a dozen utilities that purchased spectrum in the FCC's CBRS spectrum auction this summer; the company spent around $21 million on licenses across California.
Now, SDG&E will be able to add Anterix's 900MHz spectrum to the mix as well.
SDG&E plans to initially use its private wireless LTE network for a "Falling Conductor Protection (FCP) system," which relies on low-latency communications to detect a powerline that has failed and then de-energize it before it comes in contact with the ground. Such technology could potentially prevent the types of devastating wildfires that destroyed the town of Paradise, California, in 2018.
But that's just one application of dozens, according to Anterix's Schwartz.
He suggested that the rolling blackouts across Texas this week serve to underscore the topic. "There clearly is a need for modernizing the electric grid," he said.
But money talks and, in this case, the sum that Anterix is getting from SDG&E speaks volumes.
Counting the MHz-POP
"SDG&E's footprint covers 3.6 million people, so, at 6MHz, this implies ... $2.31 per MHz-POP," wrote the financial analysts at Evercore. The per MHz-POP calculation is applied to most spectrum transactions and reflects the number of people covered compared with the amount of spectrum available, though it can be affected by a wide variety of factors.
As analyst Roger Entner with Recon Analytics recently noted, $2.31 per MHz-POP sits near the high end of most recent spectrum transactions. He calculated that the FCC's AWS-3 spectrum auction in 2015 set a high mark at $2.71 per MHz-POP, partly because operators didn't have to install new equipment to put it to use.
He pointed out that the FCC's recent C-band spectrum auction, which ended with a record-breaking total of $81 billion in total bids, only reached $0.94 per MHz-POP. He said that's because the C-band auction offered 280MHz, whereas the AWS-3 auction only offered 65MHz.
Anterix's Schwartz said the company often works carefully to educate its utility customers on the value of spectrum in order to arrive at a price. Anterix's other major customer for spectrum is Ameren, though Schwartz suggested Anterix could add two to three additional customers during 2021.
The future of private wireless
Nonetheless, Anterix's deal with SDG&E "shows spectrum is highly valuable," Schwartz said.
However, as the analysts at Evercore noted, Anterix's agreement with SDG&E is somewhat complicated by the fact that Anterix agreed to help upgrade some existing equipment using the 900MHz band to prevent interference, "so the company will incur some retuning costs to achieve this revenue."
More broadly, the efforts by SDG&E have implications for a wide range of companies in the wireless industry, beyond those selling spectrum. After all, if SDG&E is willing to spend around $71 million on spectrum for its private wireless LTE network, there will likely be additional opportunities for security providers, cell tower suppliers, equipment vendors and others.
Indeed, Nokia's leadership in 2019 predicted that the private wireless market could eventually double the size of the commercial wireless industry, growing into an opportunity spanning 14 million basestations globally.
- Nokia CTO: Private Wireless Could Be 2x Bigger Than Commercial Wireless
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- Utilities shift from tests to deployments with private LTE