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Wireless auction approaching $1 billion

The Federal Communications Commission is expected to have netted the U.S. Treasury at least $1 billion by the third day of its wireless spectrum auction.

The Federal Communications Commission was expected to have netted the U.S. Treasury at least $1 billion by Thursday, the third day of a wireless spectrum auction.

The bids were driven by demand for spectrum in major markets such as New York, Los Angeles, Chicago and San Francisco. Wall Street estimates for how much the auction will raise range from a low of $5 billion to as high as $20 billion.

Major carriers view these licenses as a way to fill holes in the coverage of their national networks and handle ever-increasing customer traffic. Though the auction got off to a fast start, the bidding slowed in the past two days and hasn't received as much interest as the FCC anticipated a year ago.

One reason may be that the number of mobile phone subscribers in the United States has peaked.

"Worldwide cellular subscribers increased rapidly from 1993 to a peak in 1999," said Strategis Group analyst Ayse Ozgur Aytar, but since that peak, industry growth has "slowed significantly."

At the end of the first day, two rounds had produced a net of $501 million. After two more rounds Wednesday, however, that amount had risen to only $667 million, just a $166 increase. Thursday looked about the same, with the first of the day's two rounds totaling $836 million, on a pace to end the day just over $1 billion.

The auction will end only when all 422 licenses in 195 markets have been sold, and therefore could extend into 2001.

Smaller carriers figured prominently among the top bidders. Many licenses are reserved for small bidders, so national providers have in many cases partnered with these smaller carriers as a way to gain access to the licenses while staying under an FCC limit on the amount of airwaves a carrier can own in particular markets.

Salmon PCS, Cingular's surrogate, was fifth after five rounds of bidding Thursday at a net $52.3 million and was the leading bidder for the most licenses, 60, covering 37 million people. SVC BidCo, Sprint PCS' partner, had bid a net $17 million and led in one license covering 4 million people. Alaska Native Wireless, partnered with AT&T Wireless, bid a net $6.5 million but led in 33 licenses covering 11 million people.

The leading bidder after five rounds is Theta Communications with net bids totaling $165 million. Theta is an amalgam of New York regional phone systems and venture capitalists, and it held the top three net bids in the auction--$70 million, $49.5 million and $49.5 million--all for New York City licenses.

Verizon Wireless--a partnership of Verizon Communications and Vodafone--through a bidding shell known as Cellco Partnership was second in bidding at $158.8 million, with a $44 million net bid on a Los Angeles license and a $30.6 million net bid on a Chicago license.

VoiceStream Wireless was third with $107 million in net bids, with a $44 million net bid on a separate Los Angeles license and a $19.3 million bid on a Dallas license. Coloma Spectrum bid a net $20 million on a license in its home area, San Francisco.

All of these amounts could climb much higher before the auction concludes, analysts said.