Pursuit of wireless spectrum raises possibilities for Dish Network

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yaz96

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Pursuit of wireless spectrum raises possibilities for Dish Network
By Andy Vuong
The Denver Post
Posted: 06/19/2011 01:00:00 AM MDT

It's increasingly clear that Charlie Ergen covets wireless spectrum.

And if the satellite-TV pioneer becomes a player in the highly competitive mobile-communications industry, Sprint Nextel could be his partner of choice.

In the process of closing a deal for a swath of airwaves that could be used for cellular broadband and voice services, Ergen revived efforts last week to land another block of spectrum by proposing to acquire bankrupt TerreStar Networks for nearly $1.4 billion. His previous attempt to gain control of TerreStar was cancelled by both parties in February.

The chairman of satellite-TV provider Dish Network and its sister company, EchoStar, hasn't revealed his plans for the spectrum.

But he's indicated that Dish would likely team up with an established wireless firm if it should enter the mobile-communications business.

UBS analyst John Hodulik said that partner would probably be Sprint, the first nationwide wireless carrier to launch a 4G, high-speed Internet network in the U.S.

Sprint is updating its 4G strategy with a project called Network Vision, opening the doors for new partnerships and different technologies.

"With Sprint's new Network Vision infrastructure, it is the likely partner were Charlie to build out a terrestrial network," Hodulik said.

Sprint collaborates with Clearwire on its existing 4G service, which uses WiMax technology.

Verizon and AT&T, the nation's largest cellphone service providers, have embraced Long Term Evolution technology for their 4G networks.

The LTE versus WiMax battle is similar to other format wars, such as Blu-ray versus HD DVD. Industry support is vital, and Blu-ray ultimately claimed victory as companies such as Sony and Apple threw their weight behind the standard.

At this point, it appears LTE is garnering more support from the telecommunications industry. The GSM Association, an alliance of nearly 800 mobile network operators worldwide, is a proponent of the technology.

Hodulik said if Sprint were to switch to LTE, it would need more spectrum. That's an asset Ergen is piling up.

Spokesmen for Dish and Sprint declined to comment on a potential partnership.

On Friday, Bloomberg News reported that Sprint has reached a 15-year deal to jointly build an LTE network with LightSquared, a company founded by hedge-fund billionaire Philip Falcone.

LightSquared said last year that it planned to light up the 4G network during the second half of this year, with Denver among the handful of trial markets. The company, which would operate its network as a wholesaler, has been on Ergen's radar.

"We're watching closely what LightSquared does," Ergen said during a conference call with analysts in May. "I think our spectrum fits nicely with them."

Lack of bundle a big disadvantage

Unlike cable-TV competitors, Douglas County-based Dish doesn't have its own high-speed Internet offering to pair with its video service.

That's a major disadvantage as consumers have turned to bundles of services from one provider for discounts and convenience. Those who are ridding themselves of pay-TV altogether still must keep their home broadband service to access video alternatives such as Netflix.

Satellite broadband, a service Ergen has in his playbook with EchoStar's recent acquisition of Hughes Communications, is slower than wireline service and is geared toward rural consumers.

On the other hand, mobile broadband offers speeds that are comparable to wireline service, though coverage is spotty as carriers continue to build out their 4G networks.

"There's huge upfront capital costs to get into that game unless you partner with somebody," said Steve Clement, analyst with Pacific Crest, "and I think that's the route (Dish) would ultimately take if they do get into that business."

Sprint chief executive Dan Hesse reportedly told Congress in May that the nation's No. 3 wireless carrier may be acquired if AT&T's proposed merger with No. 4 carrier T-Mobile is approved.

Joe Clayton, who officially replaces Ergen as Dish chief executive Monday, said last month that he doesn't believe Ergen's recent acquisition binge is over.

In addition to pending deals for wireless-spectrum owners DBSD and TerreStar, Dish purchased video-rental chain Blockbuster in April.

Would a Dish takeover of Sprint make sense?

Such a deal would be similar in some aspects to the recent CenturyLink-Qwest merger. Thanks in part to a high stock price, the smaller CenturyLink was able to gobble up debt-laden Qwest in a stock swap.

Sprint is saddled with about $16.3 billion in long-term debt and generates about $32 billion in annual revenue. The company's stock hovered around $5 a share late last week, giving it a market capitalization of about $15 billion.

Dish generates less than half of Sprint's annual revenue, but its market value stands at about $12 billion, with shares hovering around $28 last week. Dish has $6.5 billion in long-term debt.

A number of options

Ergen may ultimately decide to unload the spectrum to a wireless carrier for a profit and continue to resell Internet and phone services from the likes of Verizon and AT&T. His deal for TerreStar isn't certain, as other bidders could step forward for the June 30 auction.

Sprint had been expected to reveal details about its new 4G strategy by July 1, but the announcement could be delayed several weeks, according to UBS analyst Hodulik.

BTIG Research analyst Walter Piecyk said No. 1 satellite-TV provider DirecTV could pursue Dish to consolidate the market. The companies flirted with merging in the past, with regulators blocking a proposed deal in 2002.

Piecyk said Dish "would also be an attractive acquisition target of AT&T and Verizon because (Dish) could provide out-of-market pay-TV services that those companies could bundle with broadband wireless."

AT&T and Verizon's existing video services are generally limited to their landline phone territories.

AT&T has long been rumored to have interest in Dish, and Ergen's moves for wireless spectrum have revived that speculation.

"Dish is aggregating valuable spectrum positions that AT&T and Verizon could use to handle the growing capacity demands," Piecyk said.

Andy Vuong: 303-954-1209, avuong@denverpost.com or twitter.com/andyvuong

Wireless spectrum players

Dish Network

Chairman: Charlie Ergen

•Headquarters: Douglas County

•Nation's No. 2 satellite- TV provider with more than 14 million subscribers

•Purchased Blockbuster video chain in April

•Has proposed to acquire DBSD and Terre Star Networks, bankrupt satellite technology companies that own blocks of wireless spectrum

EchoStar

•Headquarters: Douglas County

•Makes set-top boxes for pay-TV providers and offers satellite services

•Owns Sling Media, maker of Slingbox, and satellite-broadband company Hughes Communications

Sprint Nextel

Chief executive: Dan Hesse

•Headquarters: Overland Park, Kan.

•Nation's No. 3 wireless carrier with 51 million subscribers, including 33 million contract subscribers

•Majority owner of Clearwire, a wireless broadband company

Pursuit of wireless spectrum raises possibilities for Dish Network - The Denver Post
 
Y

Yespage

SatelliteGuys Master
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Feb 27, 2010
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I don't get the whole AT&T-Dish rumor. With UVerse, clearly there would be issues with a monopoly there, that even the FTC can't ignore.

One possibility is that Ergen sees the writing on the wall with Data Caps. If he wants his customers to be able to get On Demand stuff, he may need to be able to do so via another portal because Sat customers could have extra fees via streaming over the web... hence 4G and beyond. 4G, like Sat TV is wireless, so the infrastructure, while expensive, doesn't need to go door to door in order to receive it.

Either that or he is looking to lease the space, knowing the value it will have in the near future. The major companies want "Net Neutrality" to only apply to the old internet (if even that!), not the new 4G+ wireless internet. There could be a fortune waiting there.
 
Stargazer

Stargazer

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Maybe Charlie will trade his limited spectrum to a cell phone company for use of their spectrum nationwide and/or to offer a bundling deal of some sorts instead of trying to start a new service with the spectrum on their own.

Maybe an agreement could be reached where there are cell phones that can pickup signal no matter where you are at. You would receiver signal from an Echostar satellite or internet/cell service when you cannot receive cell phone signals.
 
S

Sean Mota

SatelliteGuys Master
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Or maybe he is just buying it so that no one else has it. I think in the past we have seen E doing this.
 
riffjim4069

riffjim4069

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Personally, I think Ergen is positioning Dish Network to be sold...if the price is right. Of course, I don't know who would want to purchase Dish Network if it didn't include EchoStar's Sling and Set-Top-Box products.
 
digiblur

digiblur

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Jun 8, 2005
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He only has 6mhz of unpaired spectrum in the 700mhz band. Not really good for some two way communication. And it doesn't cover the entire US either.

The terrastar stuff is in the 2ghz band. Requiring closer towers than the PCS band.
 
pabeader

pabeader

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Jul 18, 2004
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you don't get bigger, if you are looking to be bought. you get smaller, lighter, leaner.
 
Stargazer

Stargazer

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That is what I am thinking. You do not try to become larger if you want to be bought. Maybe Dish thinks they need a triple play bundle in order to become more attractive before getting sold in the future. Most likely Ergen will not want to give up Dish Network.

With the limits of the spectrum he is getting, it makes sense that he trades those to a company for use of more desirable spectrum that have a broader availability that could make better use of it. It would cost a larger company less to make use of it instead of a new company trying to launch a whole new service with it.
 
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