Dish shares jump as spectrum case against its DEs sent back to the FCC

Charlie Ergen, CEO of Dish Network
Dish Network CEO Charlie Ergen (Dish)

Shares of Dish Network jumped slightly this morning after an appellate court sent the case against the company’s use of designated entities in the AWS-3 auction back to the FCC.

Dish’s designated entities (DEs), in which the company held an 85% stake, agreed in 2015 to forfeit roughly one-third of the paired AWS-3 spectrum they won at auction earlier that year. Those licenses, which primarily covered New York, Chicago and Boston, represented about $3.4 billion of the DE’s winning bids; the companies were allowed to keep nearly $10 billion worth of the licenses they won at auction.

But the U.S. Court of Appeals for the D.C. Circuit this morning remanded the case against the DEs back to the FCC. Shares of Dish climbed 4.6% on the news, as Benzinga noted, before settling around $57.40, up about 1.4% from the opening price this morning.

FCC Chairman Ajit Pai was quick to praise the decision.

“Today’s D.C. Circuit decision explains in painstaking detail why the Commission reasonably determined that Dish abused a program designed to help small businesses,” said Tina Pelkey, Pai’s press secretary, in a prepared statement. “This is an important victory for American taxpayers. In the AWS-3 auction, the two entities claiming over $3 billion in taxpayer-funded discounts were not independent small businesses, but rather under the control of Dish. Going forward, we need to make sure that this program is available only to legitimate small businesses that actually control their own destinies.”

But investors—and at least one analyst—saw the decision as welcome news for Dish, which has continued to stockpile spectrum but has yet to launch its own wireless service. Dish spent $6.2 billion on 600 MHz licenses during the FCC’s incentive auction, which wrapped up earlier this year, and the company has outlined plans to build an NB-IoT network to provide connectivity to a wide range of devices other than smartphones.

Regardless of Dish’s wireless plans, though, the decision could boost Dish’s bottom line, according to Walter Piecyk of BTIG Research.

“This is a positive development for Dish as it could ultimately result in $3.8 billion of incremental value to the company if the AWS-3 bidding credits are reinstated to the two bidders in which Dish invested,” Piecyk wrote on BTIG’s blog. “Unfortunately, it is still not the end in the process and will now be back in the hands of the FCC, albeit under the new leadership of Chairman Ajit Pai.”

Pai must now decide whether to defend the FCC’s prior stance and head back to court, Piecyk said, or to permit Dish’s DEs to adjust their applications and agreements to qualify for their bidding credits.