Dish Network’s Plan Supported By FCC Chairman, Sprint Could Be Winner

Federal Communications Commission (FCC) Julius Genachowski supported DISH Network Corp. (NASDAQ:DISH) plan to use its radio spectrum to provide wireless services, to join the competition against AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) in the wireless industry.

Dish Network's Plan Supported By FCC Chairman, Sprint Could Be Winner

DISH Network Corp. (NASDAQ:DISH) purchased the radio spectrum from TerreStar Networks and DBSD North America Inc. out of bankruptcy for a total of $2.9 billion in July, last year. By September, the company filed a license to acquire control of licenses and the authorization to use the spectrum for mobile satellite service.

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Dish Network’s wireless proposal still needs to get approval from the four other commissioners of the FCC. The agency would set a portion of the spectrum aside for an auction. Sprint Nextel Corporation (NYSE:S) could benefit from the auction, as it is expected to bid for the spectrum. The FCC commissioners would render their final decision regarding Dish Network’s plan on December 12.

According to the agency spokesperson, Neil Grace, “If approved, these actions will promote competition, investment and innovation, and advance commission efforts to unleash spectrum for mobile broadband to help meet skyrocketing consumer demand, while unlocking billions of dollars of value to the public.

DISH Network Corp. (NASDAQ:DISH) issued a statement regarding the FCC’s initial ruling related to the auction. R. Stanton Dodge, executive vice president and general counsel of the company said the proposed order of the FCC “does properly address some of the opportunities with this spectrum; it’s significantly flawed by introducing serious limitations that impair its utility. While the FCC would grant full terrestrial rights, its proposal to lower our power and emissions levels could cripple our ability to enter the business.”

“The good news is that this proposed order is not final, and we urge Chairman Genachowski and the Commissioners to recognize that the DISH plan delivers on the greatest public interest — the most investment, the most jobs, and the most spectrum. We stand ready to work with the full Commission on final rules that put the full AWS-4 spectrum to work for America and that advance the future potential of the H Block,” added Dodge.

Thomas Seitz, analyst at Jefferies, estimates that the current value of Dish Network’s spectrum is $7 billion, two times its original price.

In a research note to investors, Seitz wrote, “Even if the FCC were to require Dish to make concessions, it nonetheless validates the value of Dish’s spectrum. It is unclear at this time whether the FCC is planning to impose ‘windfall profits’ restrictions on Dish. However, if Dish were to sell the unencumbered spectrum and assuming only 30 MHz were available for commercial use, we believe the value of the spectrum would be about $7 billion.”

In regards to Sprint Nextel Corporation (NYSE:S), he believes  that the news is a positive for the cell phone company. In requesting the FCC to shift the AWS-4 spectrum up by 5 MHz, it has tried to protect its PCS G block (which it is already using) from interference and, at the same time, clearing the path to eventually bidding for and deploying the PCS H block spectrum. In our view, the PCS H block spectrum is particularly useful for Sprint Nextel Corporation (NYSE:S) since it currently uses the adjacent G block spectrum for LTE, and the additional 5 MHz would allow Sprint to use a wider (10×10 MHz) band for its LTE network.

On the other hand, Christopher King, analysts at Sitifel Nicolaus, commented that the FCC’s order would serve as a “strategic victory” for Dish Network. According to him, it would open the door for the company to enter the mobile broadband, or to monetize and increase the value of its spectrum.

We reported last week that DISH Network Corp. (NASDAQ:DISH) discussed a possible partnership with Google Inc (NASDAQ:GOOG) and other potential partners to provide a wireless service.