Dish Network could be making moves to sell at least part of the spectrum it has amassed over the past three years, potentially bringing in billions of dollars.
Three of the “designated entity” companies that Dish backed in the recent AWS-3 federal wireless auctions — which the government later found not to be eligible for discounts — have asked the Federal Communications Commission for a two-week extension to pay the more than $3 billion owed on the licenses.
The request is the first sign that Dish, which had fought the FCC decision initially, is willing to pay up to acquire the licenses.
While Dish gave no indication what it plans to do with the wireless spectrum it acquires, most analysts expect the spectrum to be sold to the highest bidder.
Dish declined to comment.
The AWS-3 licenses add about $10.4 billion in value to Dish’s already bulging wireless holdings, and some analysts have valued the company’s entire spectrum cache at more than $40 billion.
Dish is not expected to sell the entire swath in one deal — although it could — and analysts expect the pickings to be divided among existing wireless companies such as Verizon Communications, AT&T and T-Mobile.
Verizon chairman and CEO Lowell McAdam has already publicly said his company was open to buying at least some of Dish’s spectrum. McAdam recently downplayed speculation that Verizon would seek to buy Dish outright — as rival AT&T did with DirecTV — but said the spectrum assets were intriguing.
At the Goldman Sachs Communacopia conference earlier this month, McAdam said Verizon has held some discussions with Dish around providing capacity in exchange for spectrum.
“Those sorts of options are still open to us,” McAdam said.
Dish chairman and CEO Charlie Ergen has said he would sell off the licenses in the absence of finding a telco partner to help build out a wireless broadband network. On the company’s second-quarter conference call, Ergen all but gave up hope of finding a broadband partner.
On the call, Ergen seemed to be leaning more toward leasing rather than selling the spectrum, saying leasing a portion of the licenses was the “more attractive option” because it had low risk.
“And we think our spectrum is really undervalued on our balance sheet and by [Wall] Street,” Ergen said. “That’s the way you’d prove it.”
Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said he believes leasing the spectrum is the most attractive option, with Verizon the most obvious partner.
“Verizon is already starting to build out its own AWS-3 spectrum, and Dish’s spectrum is ideally suited to meet Verizon’s spectrum needs,” Wlodarczak said. “If Verizon wants to maintain its status as the premium wireless network and keep the spectrum out of competitors’ hands, a deal with Dish seems like a no brainer.”
Wlodarczak values Dish’s spectrum at about $40 billion and estimated that a 40-year lease would cost Verizon about $2.5 billion a year.
He also said he expects Dish will spin out its spectrum holdings in a separate company to shareholders, for tax purposes. That could come before the end of this year or early next year, followed quickly by a lease deal.
“In the end I think Ergen basically told you what he was going to do on the Q2 call,” Wlodarczak said. “Given that a lease remains the most logical move, that is what I think happens either now or next year. I think there is a good chance it is sooner rather than later.”
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