The valuation of DISH Network Corp. (DISH) increased in billions post the news that the ongoing AWS-3 spectrum auction conducted by the Federal Communications Commission (FCC) has surpassed all expectations. Following the development, the stock jumped more than 10% yesterday, touching an all-time high of $75.26.
As many as 70 companies are bidding for the Advanced Wireless Services-3 (AWS-3) spectrum which was initiated on Nov 13, 2014. A total of 1,614 AWS-3 licenses will be up for sale in the 1695-1710 MHz, 1755-1780 MHz and 2155-2180 MHz bands.
After the completion of Round 17 of the AWS-3 radio spectrum auction, accumulated value of the winning bids reached $24.2 billion, which is well above the Federal Communications Commission’s minimum target of $10.5 billion. Some of the major bidders in the spectrum auction are Verizon Communications Inc. (VZ), AT&T Inc. (T), T-Mobile US Inc. (TMUS) and DISH Network.
A Look at DISH’s Spectrum
DISH has created an extensive portfolio of spectrum – arguably, the most important component of wireless networks. Notably, DISH currently has 50MHz of spectrum of which 40 MHz are in the AWS-4 (2000/2200 MHz) band while the remaining 10 MHz fall in the H-band. AWS-3 spectrum ownership will enable the company to interoperate LTE service AWS-1 (1700/2100 MHz) spectrum band.
Since 2008, DISH has spent $10.5 billion on spectrum. The value of the AWS auction will help set the floor price of DISH’s own wireless spectrum.
Multiple Options Open for DISH
We believe DISH’s attempt to enter the wireless market is a diversification strategy to counter the pay-TV market saturation. The company enjoys the opportunity to collaborate with established telecom or tech companies to jointly establish a wireless network or monetize its spectrum holding for considerable profits. Some industry researchers have estimated that the existing spectrum portfolio of DISH may worth around $18-$20 billion.
T-Mobile US remains a popular bet in the ongoing consolidation trend within the U.S. telecom industry. According to industry rumours, the AWS-3 auction may pave way for a merger between the nation’s fourth largest telecom operator, T-Mobile US and the second largest satellite TV operator, DISH Network. In Sep 2014, Bloomberg reported that DISH is in talks with Deutsche Telekom, the parent company of T-Mobile US, about a possible merger and may seriously pursue the deal after the completion of the AWS-3 spectrum auction.
If T-Mobile US can merge with DISH, the joint entity will boast a significant portfolio of spectrum on all AWS-1, 3, 4 as well as H-band spectrums. The merged company will also be able to deploy high quality LTE services like super-fast video delivery and enhanced application download and upload speeds.
DISH may be willing to sell or license out its spectrum but the big question remains who will buy it. This is because the FCC may not allow large players like Verizon or AT&T to hold significant portion of the same. In such circumstances, the company can divide the spectrum and allow fresh players like Google to enter the wireless market so as to share costs entailed by DISH to install and operate a nationwide wireless network.
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