At the end of bidding Friday, something strange happened in the FCC's Andromeda auction of midband spectrum for 5G: A major bidder appeared to drop out, and some analysts are speculating that it might be an attempt by Verizon to kill the auction.

"Is Verizon signaling T-Mobile (or vice versa) to try and kill the auction?" speculated analyst Tim Farrar with TMF Associates on Twitter Monday. "We'll see what happens tomorrow, but the timing of the drop makes signaling a real possibility."

Others agree this is indeed feasible.

"The move ... could reflect Verizon dropping out," explained the financial analysts at New Street Research in a note to investors Friday. Verizon may well be trying to "engineer the auction's collapse," they speculated.

And why would Verizon want an FCC auction of valuable midband spectrum to fail? "Verizon might be content with not needing to spend additional funds for spectrum in the near term," argued the financial analysts at Evercore in a recent note to investors.

Moreover, the collapse of the Andromeda auction could prevent one of Verizon's main competitors – AT&T – from improving its own spectrum position.

"It is an elaborate theory," acknowledged the financial analysts at New Street. But it's nonetheless possible, they wrote.

A mysterious early exit

The FCC's Auction 110 of spectrum between 3.45GHz and 3.55GHz, which started October 5, has so far generated a total of $1.6 billion in winning bids through 11 rounds of bidding. The event has been dubbed the "Andromeda auction" by Light Reading because it sounds cool.

As in prior spectrum auctions, the FCC is only releasing the amount and geographic location of each bid and not the identity of the bidder. The agency is expected to release the identity of winning bidders after the auction is over, likely sometime in January.

Andromeda bidding is scheduled to resume Tuesday.

However, as noted by the Evercore analysts, bidding in the early rounds of the Andromeda auction stayed relatively consistent until round ten, on Friday, when demand dropped sharply. Sasha Javid, COO of BitPath, closely tracks the Andromeda auction, and he said the drop likely indicates that a major bidder like Verizon or Dish Network dropped out of the event.

But round ten is a strange time to drop out of the auction because – with just $1.6 billion in total bids – the event is nowhere near its $14.8 billion reserve price. The auction must raise at least that amount in order to finance the clearing of existing federal users. If the auction does not reach that reserve price, winners will not get access to the spectrum and it will be considered a failed auction.

Thus, the timing of the drop, so early in the auction, is "odd," according to the New Street analysts.

"We would expect Verizon to start dropping out just as prices clear the reserve, driving up the premium without much risk of getting stuck with spectrum they say they don't really want," the New Street analysts explained. "If they were bidding to be opportunistic, they must have at least expected to pay the clearing price, and again, we are nowhere near that."

Meaning, if Verizon did drop out early, the company did so early in order to publicly signal to other bidders that they too should drop out, in order to prevent the auction from reaching its reserve price. "Verizon could be dropping out in an obvious way in the hopes that T-Mobile will follow suit," the New Street analysts wrote.

Dropping out in round ten, on Friday, "would be the absolutely ideal time to do this signaling now before the long weekend and let the other bid team(s) have time to contemplate whether they should pull out and tank the auction," Farrar wrote.

One theory of many

To be clear, both Farrar and the New Street analysts acknowledge that there are other possible explanations for a significant drop in bidding activity in round ten. For example, Verizon might not have been the company that exited the auction. Dish Network or T-Mobile, two other major bidders, might have done so. Dish might want to scuttle the Andromeda auction to raise the value of its existing spectrum licenses, while T-Mobile may have dropped out to prevent AT&T from getting more midband spectrum.

Most analysts believe AT&T is the only bidder that is really desperate for licenses in the 3.45GHz-3.55GHz Andromeda auction.

Further, there are other situations that could explain a drop in bidding in round ten. For example, the New Street analysts speculated that a private equity firm like Grain Management or Columbia Capital may have exited the auction after discovering relatively robust demand in early bidding.

"Financial bidders [like private equity companies] would have had no idea how much demand there would be for spectrum in any market. If demand in top markets ended up being low, they could have gotten a steal," wrote the New Street analysts.

Nonetheless, there will be plenty of interest in Andromeda bidding this week. Executives at AT&T are likely hoping that the auction meets its reserve price. Andromeda auction winners can only walk away with a maximum of 40MHz of the 100MHz total up for grabs, and AT&T likely would be pleased to add an additional 40MHz of midband spectrum to the licenses it won earlier this year in the FCC's blockbuster C-band spectrum auction.

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— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano