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What’s Behind Dish’s LightSquared Pullback

Dish Network pulled the plug on its pursuit of bankrupt wireless communications company LightSquared, a move that could help the satellite-TV provider’s position in ongoing litigation with the troubled company while freeing it to focus more intently on the upcoming federal H-block spectrum auctions.

Dish in July had made a $2.2 billion “stalking horse” bid for LightSquared, a wireless startup that had planned to build an ultra-high-speed broadband service. Light-Squared ran out of steam in 2012 when the Federal Communications Commission feared its frequencies would interfere with global positioning satellites.

LightSquared tried to rectify the problem, agreeing to give up 10 Megahertz of spectrum adjacent to GPS frequencies and receiving FCC permission to experiment with sharing frequencies used by weather balloons. But the company ended up fi ling for Chapter 11 bankruptcy protection in 2012.

ERGEN ACCUSED

A lawyer for an official committee appointed to oversee any potential LightSquared auction said Jan. 9 in U.S. Bankruptcy Court in New York that Dish had withdrawn its bid, according to a Reuters report. Dish did not return requests for comment.

LightSquared has accused Dish chairman Charlie Ergen of buying the troubled company’s debt at low prices, as a private individual, with the intention of later selling it to Dish. As a competitor of LightSquared, Dish itself would be prohibited from buying the company’s debt.

By withdrawing its bid, Dish could counter Light- Squared’s accusation while setting up a scenario to let the satellite giant swoop in and take over the troubled company at a later date, according to reports.

NOT OVER YET

LightSquared has proposed a $4 billion restructuring plan, backed largely by private equity fund Fortress Investment Group. But that deal must be approved by the FCC, and some analysts see that as a long shot.

“While LightSquared may be over, the bankruptcy process is complicated,” Pivotal Research Group principal and senior media & communications analyst Jeff Wlodarczak said. “I would not rule [Ergen] out yet.”

Dish shares fell by as much as $2.14 each (3.7%) to $55.82 in early trading last Thursday (Jan. 9), closing at $56.48, down 2.6% or $1.48. The stock regained 13 cents on Jan. 10 to close at $57.21.

While Dish might be looking to better its position in its court case, the motivation for dropping the bid might be financially driven. Ergen might feel the capital would be put to better use in the upcoming federal H-block spectrum auctions.

The first H-block auction is scheduled for Jan. 22 and will be followed by two more such sales the FCC is conducting to put more wireless spectrum into the market and raise more money for the U.S. Treasury.

Dish, which has about 40 MHz of existing spectrum adjacent to the H block, is expected to be a major participant in the process. Initial bids are set at a minimum of $1.56 billion.

Dish has spent about $3 billion acquiring its wireless spectrum over the past few years, licenses that some analysts estimate are worth more than $9 billion today.

TAKEAWAY

Dish Network has reportedly dropped its bid for LightSquared as it moves to focus on the upcoming H-block spectrum auction.