Dish's Ergen again praises T-Mobile, says Dish could jump into cloud-based wireless world

Dish Network (NASDAQ: DISH) CEO Charlie Ergen and other Dish executives said the company is keeping all of its options open in terms of Dish's wireless strategy--but Ergen again expressed enthusiasm for T-Mobile US' (NYSE:TMUS) approach to the market and its business strategy.

During Dish's quarterly earnings conference call with analysts and media, Ergen said that "we're keeping all options open, but obviously we admire what [T-Mobile CEO] John [Legere] and his team has done at T-Mobile." Ergen previously praised T-Mobile in February.

For his part, Legere too voiced interest in partnerships with companies like Dish. Last month during T-Mobile's own earnings conference call, Legere said that "as content and entertainment and social are moving to the Internet and the Internet is moving mobile, these industries, the adjacent industries are in the same game that we're in." He added: "So I think you need to think about the cable industry and players like us as not competitors but potential partners and alternatives for each other in the future."

"I don't know whether our paths will cross or not," Ergen said of T-Mobile.

Tom Cullen, Dish's executive vice president of corporate development, said during Dish's earnings call that the company has non-disclosure agreements with multiple companies in the wireless industry. He also said Dish continues to work with the 3GPP to get Dish's spectrum added into wireless standards. Interestingly, Cullen noted that new video-sharing apps like Periscope and Meerkat and the continued rise of mobile video traffic is "opening up conversations with non-traditional players."

Cullen also said that Dish is open to wholesaling its wireless spectrum. "The wholesale discussion is an increasing priority in the minds of some players whose business models are more dependent on high-speed, low-latency cloud connections," he said.

Dish already controls 40 MHz of mid-band AWS-4 spectrum in the 2 GHz band and 10 MHz of 1900 PCS H Block spectrum. Dish's designated entity (DE) partners won 25 MHz of spectrum in the FCC's recent AWS-3 auction. However, the FCC has not yet issued spectrum licenses to Dish's DE partners because of ongoing concerns over whether those DE partners should receive a 25 percent discount on the price of the licenses, worth $3.3 billion in this case. The discount is intended for small businesses and minority-owned companies.

"I'm confident that Dish and the DEs followed the rules of the auction," Ergen said. "And I think the discount will be allowed."

If the DEs do not get the 25 percent discount, Ergen said Dish would then be able to acquire the licenses at full price. He also said that, if the DEs do not get the discount, Dish would not have to follow the FCC's rules for DEs that own spectrum. For example, he said Dish would be able to lease more than 25 percent of the spectrum, passing the FCC rule that DEs can only lease under 25 percent of their spectrum.

In a research note, Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata wrote that the $3.3 billion discount for the AWS-3 spectrum licenses is "relatively insignificant in size" compared with the $45 billion value they ascribe to Dish's total spectrum portfolio. While paying the extra money could make investors uneasy, they wrote they believe "the company may fund the incremental spending with cash on hand, incremental partner contributions (other DE financial investors) or through divestitures of ancillary assets and spectrum (i.e. the 700 MHz D&E blocks or the stranded PCS H-Block uplink)."

Turning to next year's incentive auction of 600 MHz broadcast TV spectrum, Ergen said Dish would like to participate. He said that Verizon and AT&T would like to delay the start of the incentive auction, since they are the only two companies with large amounts of low-band spectrum. "They have a duopoly in the business if other people aren't allowed to compete in the low-band spectrum," he said.

Related Articles:
FCC still reviewing whether to grant Dish partners $3.3B in AWS-3 discounts
Report: Dish's AWS-3 partners might lose out on $3.3B in bidding credits
FCC seeks comment on new rules that would block a replay of Dish's AWS-3 auction bidding strategy 
FCC to probe changes to its designated entity rules ahead of incentive auction
Sprint, T-Mobile, Dish join forces with others to press FCC on incentive auction rules
Dish's spectrum conundrum: Make $40B-$44B now or up to $155B later

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