DISH Network Corp. (DISH) is one of the 34 possible contenders to bid for the upcoming auction of PCS H Block wireless frequencies by the Federal Communications Commission (FCC). Notably, DISH is the only major company to file for applications. The remaining 33 companies are small regional telecom operators such as NTELOS Holdings Corp. (NTLS), CSpire, Piedmont Rural and James Valley Cooperative Telecom.
The bidders need to file their complete application form and upfront payment by Dec 18, and the auction will be conducted on Jan 22, 2014. This is the first auction for wireless spectrum in the U.S. after 2008.
DISH, the second largest satellite TV operator in the U.S., has constructed an extensive wireless/satellite spectrum base over the last couple of years. In 2012, the company purchased 2 slots of the 40 MHz S-band wireless spectrum from the bankrupt TerreStar Networks Inc. and DBSD North America Inc. for a consideration of $2.9 billion. Moreover, the company owns a slot of 700 MHz airwaves.
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Although DISH Network received the FCC approval to deploy a nationwide wireless network, it came with a restrictive condition. The FCC said that DISH can start installing its nationwide wireless network using only a truncated power level. The FCC claimed that a reduction in DISH’s frequency level is required to avoid interference with an adjacent PCS H Block frequency which the regulatory body will now auction.
DISH already submitted a bid for $1.56 billion for the H Block spectrum and it seems that other smaller bidders may not be able to match to that amount. If finally DISH wins H Block frequency, it will significantly raise the company’s power and emission levels to establish a profitable venture in the wireless market.
Furthermore, DISH also offered a bid of $2.22 billion to acquire 40 MHz of wireless spectrum held by LightSqured, which is currently bankrupt. This auction will take place later this month.
We believe DISH’s attempt to enter into the wireless market is a diversification strategy to counter pay-TV market saturation. DISH Network enjoys the opportunity to collaborate with several established telecom or tech companies to jointly establish a wireless network. Management estimates that its portfolio of wireless spectrums can be monetized for $10 billion.
However, management is yet to take a final decision on its wireless venture. Earlier this year, DISH failed its attempt to acquire Sprint Corp. (S). Current rumors in the industry suggest a possible merger between the two largest satellite TV operators, namely, DISH and DIRECTV (DTV). Currently, DISH has a Zacks Rank #3 (Hold).