The FCC this week announced it will open a process that could potentially give Dish Network around $500 million in cash as well as around $3 billion worth of AWS-3 spectrum licenses.
“The FCC process should run its course sometime in 2H18 or early 2019. We view this development positively for DISH, as it will result in either a positive outcome (worth up to $7 / share) or a status quo,” wrote the analysts at New Street Research in a note to investors today.
The issue stretches back to 2015, when the FCC held its AWS-3 spectrum auction. Two entities—Northstar Wireless and SNR Wireless LicenseCo—received a small business bidding discount during the auction worth around $3 billion. However, after the auction ended, the FCC said those businesses were tied to Dish and shouldn’t have gotten the small business discount. As a result, Dish paid a $515 million fine and Northstar Wireless and SNR Wireless LicenseCo relinquished roughly $3 billion worth of spectrum.
Then, as CNET noted in 2017, a court ruled that the FCC needed to allow Dish and its so-called “designated entities” (DEs) Northstar Wireless and SNR Wireless LicenseCo the chance to restructure their partnership so that it would pass the FCC’s rules. That’s exactly what the FCC did in its order on the topic (PDF) issued this week.
“We provide an opportunity for each Applicant to renegotiate its business arrangements with DISH and the other parties to its agreements in order to cure its ineligibility for the bidding credits it claimed,” the FCC wrote in its order, as noted by Broadcasting & Cable.
The New Street analysts said they see three possible outcomes to the process:
- Dish gets its $515 million fine back and its lost $3.4 billion worth of spectrum.
- Dish gets its $515 million fine back but not the licenses, which the FCC would reauction.
- Dish doesn’t get anything back, but could potentially bid on the spectrum if the FCC reauctioned it.
“Outcomes #1 and #2 are unambiguously positive for DISH, as they would result in DISH getting $0.5BN in cash and potentially the licenses worth $3.2BN; receiving these assets is not at all reflected in current expectations for DISH,” the analysts wrote. “The third outcome is roughly status quo for valuation, as the company would simply pay cash for licenses worth a similar amount, though the market may react negatively to DISH raising another $3BN for spectrum purchases. There are several political cross-currents to wade through that makes calling an outcome difficult, but we think DISH has a reasonable chance of a positive outcome.”