DirecTV and Echostar Call It Quits as AWS Prices Soar in Late Bidding
Wireless DBS, the deep-pocketed partnership between DirecTV and Echostar, effectively dropped out of the bidding in the advanced wireless services (AWS) as the auction progressed more quickly than many expected. Bids topped more than $8 billion total. As of late Tues., the DBS partnership had used all its waivers and stopped bidding.
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“I think they're done,” said analyst Tim Farrar, referring to the DBS partnership: “DirecTV looks like it has jumped ship and things are basically winding down… It’s an interesting set of developments.”
Verizon Wireless -- though subsidiary Cellco - and Cingular and T-Mobile have emerged as the dominant bidders. SpectrumCo, the joint cable venture with Sprint Nextel, also appears to be in retreat and isn’t pursuing the major regional licenses. Farrar said he was surprised how quickly prices increased for the large regional licenses. “It’s also quite surprising how quickly Wireless DBS pulled back,” he said: “They pulled back at a relatively low price range” after licenses hit 40 cents/MHZ POP.
If DirecTV and EchoStar are out of AWS, they may be headed for an Ancillary Terrestrial Component (ATC) deal with one or more mobile satellite services (MSS) operators, analysts said. Mobile satellite services spectrum in the L-band and S-band can be tapped terrestrially, nationwide under an ATC license from the FCC. Mobile Satellite Ventures (MSV) holds the only such license.
“This certainly reinvigorates activity in the ATC sector,” Farrar said. “I think there may be a push toward at ATC deal because of the national footprint that would give them. Clearly [Wireless DBS] was in it for a national footprint because they were bidding on the large, regional licenses,” Farrar said. MSV and L-band competitor Inmarsat hold around 30 MHz of spectrum each.
Some analysts expected a DBS-MSS deal to materialize before the AWS auction, but said parties involved were hung up on price. “MSS players presumably weren’t willing to settle” for existing offers, Farrar said: “They bet AWS would come up with higher prices than people expected. At least to some degree, that appears to be justified for the large national licenses.”
Craig Moffett, an analyst with Bernstein Research, told us the withdrawal of the DBS bidding group could mean one of several things: “Both DirecTV and Echostar have said in the past that their strategic position would be enhanced by the availability of more wireless networks regardless of who owns them… To some extent they could be signaling that they are sufficiently comfortable that a range of new wireless alternatives will emerge from the auction that they no longer feel like it’s incumbent on them to be the ones to build to… Alternatively, they could be signaling that the price-value equation for spectrum is in this auction looks like it will be less interesting.”
Moffett said DirecTV and Echostar may now focus on alternatives such as a partnership with MSV, Clearwire or another company. Moffett said SpectrumCo also appears to be retreating. “We could be seeing nothing more than SpectrumCo and Wireless DBS falling in the wake of the bigger, more committed players,” he said: “You would have had to be sort of circumspect from the beginning about whether SpectrumCo and Wireless DBS were going to be able to hold their own against Verizon and Cingular if Verizon and Cingular decided that they really want this spectrum.”