Dish Network (NASDAQ: DISH) CEO Charlie Ergen said that wireless carriers would "strategically commit malpractice" if they did not take a look at Dish's vast spectrum trove and try to do something with it. However, Ergen also indicated that Dish likely will not strike any kind of deal related to its airwaves before the start of next year's incentive auction of 600 MHz broadcast TV spectrum, in which Dish might take part.
According to a Seeking Alpha transcript of his remarks, Ergen said yesterday on Dish's third-quarter earnings conference call that "any number of companies would be – strategically commit malpractice if they didn't look at the spectrum position that we have, because it would be a strategic advantage over their competitors. And the need for spectrum is only getting greater."
Dish's core mid-band spectrum consists of 40 MHz of nationwide AWS-4 spectrum, which Dish has the option to use exclusively for downlink operations, as well as 10 MHz of the 1900 MHz PCS H Block.
Dish's designated entity partners, Northstar Wireless and SNR Wireless, made $13.3 billion in gross provisional winning bids for 702 licenses during the FCC's AWS-3 spectrum auction earlier this year. Only AT&T (NYSE: T) spent more money in the event. The DEs hoped to receive a 25 percent small-business credit, lowering their total expense to around $10 billion, but the FCC ruled that they should not receive the discount since the agency said they are effectively controlled by Dish. (Dish disagrees with that ruling and the issue is currently in court.)
In response, last month Dish's DEs, in which Dish holds an 85 percent economic stake, decided to give up around a third of the paired AWS-3 spectrum licenses they won earlier this year in the AWS-3 auction -- mostly spectrum licenses covering New York, Chicago and Boston. The licenses that Dish's DEs are relinquishing represent around $3.4 billion worth of their winning bids; they will keep about $9.8 billion worth of the licenses they won at the auction. The licenses could be re-auctioned in late 2016 or early 2017.
In August Ergen said that it was more likely that Dish would lease or sell its spectrum rather than partner with a carrier to deploy its airwaves. Analysts have speculated Verizon (NYSE: VZ) might be a prime candidate to lease Dish's spectrum, but Verizon Communications CFO Fran Shammo seemed to dismiss that idea during an appearance at an investor conference today (see this related story).
Ergen said yesterday that "any of the existing wireless carriers, our spectrum fits pretty well with. Sprint's maybe less, may or may not be, I just don't know how they've done a network build. I know a lot about the other networks."
"And obviously, all the other providers have spectrum, they have AWS-3 and AWS-1 spectrum that propagates essentially the same as our AWS-3 and AWS-4 spectrum," Ergen added. "So they fit really well. And obviously any current providers, if we were to partner with or do something with or lease something to, they obviously would have more spectrum than anybody else. So to the extent that somebody wanted to be aggressive and be and have more spectrum, obviously we're somebody that would probably take a look at."
There has been speculation among financial analysts that Dish will strike a deal ahead of the FCC's deadline for applying to bid in the incentive auction, at which time anti-collusion rules will kick in and make it impossible for a deal to get done.
"I would say the odds are greater that we wouldn't do something before the deadline than we would," Ergen said in response to a question about the deadline. "But you just never know, right? My experience with deals are that people can sit around and talk about them, they're just not going to happen, but when somebody decides to do something, they move pretty quick. But there are -- I agree with your statement, there are a lot of complexities around this auction that are going to take some time."
Ergen acknowledged that there is a great deal of media and investor speculation about what Dish will do with its spectrum and when. "I know that there's always a lot of angst on the press and investors for things to happen," he said, but added that strategic decisions a company makes "better have a good chance of success."
Ergen also said Dish has not yet decided whether it will participate in the first-of-its-kind, dual-sided incentive auction. He noted that some spectrum blocks will be more impaired by interference than others. "So we've got to do a lot of homework to see whether we are able to model that into something where we would feel comfortable participating in the auction," he said.
- see this Seeking Alpha transcript
- see this SEC filing
Analysts: Comcast, Charter, Dish and Google might bid in 600 MHz auction - but won't be building out networks
T-Mobile criticizes Dish over AWS-3 license defaults, says Dish should be barred from bidding again on those licenses
Verizon is running out of spectrum but could get escape hatch by leasing Dish's airwaves, analysts say
Analysts: Dish could strike a spectrum deal with Verizon or a perpetual leasing agreement
Dish exec says company may participate in the FCC's 600 MHz incentive auction
Dish's DEs give up $3.4B in AWS-3 spectrum, but Ergen's Verizon strategy remains intact