Options Still Seen for Dish Network Spectrum Assets With AT&T and DirecTV Out of Play
An AT&T buy of DirecTV for more than $65 billion doesn’t change much for Dish Network in terms of putting its spectrum assets to use or taking advantage of other deals, said wireless and satellite industry observers in interviews. Dish Chairman Charlie Ergen said last month that a combination of his company and DirecTV would create the biggest synergies and that a buy of Dish would turn out differently for different carriers (CD May 9 p14). With DirecTV off the table as a partner for now, some observers said Dish is still an attractive buy for wireless operators. One said Dish will likely need to make a move now that it can’t partner with AT&T or DirecTV.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Dish has been doing well in acquiring additional spectrum, and AT&T/DirecTV isn’t a problem for Dish, said James Stenger, a mergers and acquisitions attorney at Chadbourne & Parke. Dish has been able to acquire some additional spectrum through previous bankruptcy proceedings and it has an option to obtain spectrum in LightSquared’s pending bankruptcy proceeding, Stenger said. There were reports last year that Dish would like to pair its S-band spectrum with LightSquared’s spectrum (CD Aug 28 p2). A New York federal bankruptcy judge subjected Ergen’s nearly $1 billion debt for the satellite capacity company to subordination (CD May 12 p10). “But ultimately, Dish has been successful in buying the spectrum from the reorganized debtor,” said Stenger. “I wouldn’t be surprised to see Dish end up with the LightSquared spectrum.”
AT&T/DirecTV “doesn’t change much from Dish’s standpoint except probably eliminating AT&T” as a potential buyer of its commercial mobile radio service spectrum, said Fletcher Heald lawyer Donald Evans, who doesn’t represent any of the carriers mentioned. Dish now can either turn to Verizon or a “foreign player” as a buyer or strategic partner, because it “seems to have little appetite to actually build out” its spectrum holdings, he said. Dish declined to comment for this story.
Paul Gallant, a Guggenheim Partners analyst, said the landscape for Dish has changed some. Dish’s spectrum prospects are “definitely less than they were a month ago” because AT&T/DirecTV removed two potential merger partners from the equation, he said. “Dish continues to have a real opportunity to build out its wireless network, but I think investors would really want them to do a spectrum hosting deal with Sprint to improve the economics.” Getting its hands on more spectrum probably isn’t what Dish needs, said Kristin Paulin, Informa Telecoms & Media senior analyst. Dish needs an existing wireless partner, she said. It would be “very difficult for Dish to enter the U.S. wireless market on its own and be successful,” she said. Dish has a lot of spectrum right now, “which makes it an attractive asset already to a partner,” she said.
A merger of Dish and DirecTV probably wouldn’t have helped Dish in spectrum use, Stenger said. DirecTV is another satellite operator and “Dish really needs ground-based spectrum,” he said. The AT&T takeover of DirecTV helps Dish and “shows that Dish itself is an attractive company that might attract a bid from another operator,” he said. Verizon said it’s not going after Dish, but there are other operators besides Verizon, and circumstances can change, he said. The price AT&T is paying for DirecTV “is going to reflect well on the value of Dish,” Stenger added: “When Dish’s value goes up, that makes it easier for Dish to buy other companies."
The door is still open for Dish to partner with T-Mobile, some analysts said. With AT&T/DirecTV and Comcast/Time Warner Cable pending, “Dish needs a tie-up to effectively compete,” Paulin said. T-Mobile could make Dish stronger “in terms of having the ability to offer bundled services options and the ability to use its spectrum assets,” she said. Dish also may be receptive to a deal with a technology, telco or content distribution company seeing its direct-to-home business coupled with wireless licenses as a valuable asset, she added. Stenger agreed the overall trend is the expansion of broadband connectivity for video services. A combination of Dish and T-Mobile would combine wireless broadband with an experienced video services provider, which is the same argument AT&T is using in its takeover of DirecTV, he said.
Although Dish could potentially renew its interest in T-Mobile, it may not find the prospect of a bidding war with Sprint attractive, Gallant said. Any potential Verizon interest in Dish appears to be waning as well, so “the go it alone option is looking more plausible at this point,” he said. “People underestimate Dish at their peril.” Gallant noted Dish’s recent Disney deal as a potential foothold for it to become a nationwide over-the-top provider.
Dish can bid in the AWS-3 auction to add to its spectrum and “existing operators will likely need additional spectrum as video consumption grows,” said Walter Piecyk, BTIG Research analyst. Dish also can provide a way for a company that isn’t currently in the wireless business, like Amazon, Comcast or Google, “to get a critical mass of spectrum on day one,” he said. Those companies or others may realize in a few years that having a licensed spectrum wireless strategy is the preferred route, he added. , (jphillips@warren-news.com)