Dish to face smaller challengers in U.S. airwaves auction

Reuters

By Alina Selyukh

WASHINGTON, Dec 4 (Reuters) - Satellite TV provider DishNetwork Corp will compete against smaller wirelesscarriers and individuals when the U.S. Federal CommunicationsCommission auctions spectrum on Jan. 22, the agency said onWednesday.

The FCC will auction the so-called H Block frequencies inthe first opportunity the regulator has offered companies toacquire ownership of new airwaves since 2008.

Dish, a company known for aggressive moves, is the largestand most formidable of the 34 applicants who indicated aninterest in bidding for ownership of airwaves in some geographicareas, according to new FCC documents.

The H Block spectrum is adjacent to some frequencies alreadyowned by Dish, meaning the satellite TV company could end up incontrol of a valuable contiguous slice of airwaves.

Dish, co-founded and run by Charlie Ergen, has been aimingfor an expanded role in the wireless industry. Acquiring the HBlock spectrum promises to be a critical boost, although whatErgen plans to do with it remains a mystery.

"Clearly he thinks that's going to open doors for him," saidMacquarie analyst Amy Yong, who estimated that securing H Blockspectrum would add at least $3 per share to Dish's value net ofcosts. "It creates a lot of optionality for him. That's reallythe right way to look it."

Earlier this year, Dish had pledged to bid $1.56 billion forthe spectrum if the FCC gives it more flexibility on how fastand how to use some of the spectrum it already has.

The FCC has yet to make such an agreement, but that amountbecame the auction's base price, meaning the auction will notclose until the FCC has raised $1.56 billion.

The auction's proceedings are required to help fund a newnetwork for emergency communications. The applicants now haveuntil Dec. 18 to make certain upfront payments that willindicate the scope of their participation in the auction.

Other than Dish, applicants included Mississippi-based CSpire, Virginia-based wireless company nTelos Holdings Corp, other regional and rural providers and severalindividual investors, documents showed on Wednesday.

Sprint Corp and T-Mobile US Inc recently saidthey had decided not to participate in the auction. The top two wireless providers VerizonCommunications Inc and AT&T Inc were not expectedto be interested in the H Block spectrum.

DISH STRATEGY

On Dish's quarterly earnings call in November, Ergen said hewould look for ways to use wireless spectrum to enhance Dish'svideo offerings rather than on areas such as voice, data andtexting services.

Otherwise Ergen said that he was keeping all options open,from the possibility of a purchase of No. 4 U.S. mobile operatorT-Mobile US, to forging a partnership, building awireless network or even selling Dish's spectrum.

"Whatever they end up doing, whether they merge or do somenetwork sharing agreement or offer their own service in somecapacity, it will have more value if it's contiguous," saidStifel analyst David Kaut.

Dish, which applied for the auction as American H BlockWireless LLC, declined comment on Wednesday.

Dish's potential entry into wireless has captured theimagination of investors who see a chance for it to transforminto something other than a pay TV provider, less beholden tothe rising programming costs that bruise its margins.

Earlier this year Dish fought, and lost, a battle withSoftBank Corp to take over Sprint and smaller operatorClearwire Corp. It is now also fighting for the spectrum ownedby bankrupt LightSquared, submitting a baseline bid of $2.2billion for them in the auction expected later this month.

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