Dish Is One Step Closer To Acquiring LightSquared’s Assets

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Earlier this week, a Manhattan bankruptcy judge approved an auction process that will include Dish Network’s (NASDAQ:DISH) $2.2 billion bid for 40 MHz of LightSquared’s wireless spectrum. [1] LightSquared’s spectrum is particularly aligned with Dish’s requirement, and it should be able to acquire the assets with little difficulty. The satellite company had earlier made an unsuccessful attempt to acquire spectrum assets by making bids for Sprint Corp. (NYSE: S) and Clearwire Corp. Dish will benefit from acquiring the LightSquared’s spectrum since it will allow an entry into wireless industry given the saturation in the pay-TV market.

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Dish Will Benefit From LightSquared’s Spectrum

LightSquared had been developing a wholesale 4G wireless broadband network integrated with satellite coverage across the U.S. However, in early 2012, the FCC moved to bar the company’s planned national broadband network after being advised by the NTIA (National Telecommunications and Information Administration) due to the issue with LightSquared airwaves, which are similar to the ones used by Global Positioning System (GPS) navigation systems.

LightSquared’s spectrum is particularly beneficial for Dish given that is already has a Mobile Satellite Service (MSS) license. Dish amassed its MSS spectrum through the acquisitions of DBSD and TerreStar for $2.7 billion in 2011. [2] Currently the value of Dish’s overall spectrum base is worth about $11 billion. [3] If Dish succeeds in acquiring this spectrum, it will have to wait for majority of LightSquared’s airwaves to be cleared by FCC. However, it should soon be able to use some specific portions. Dish has also submitted an application to the FCC to give it flexibility to use its existing spectrum for downloading information while LightSquared has applied for permission to use some of its spectrum for uploading information. This would help Dish pair its spectrum with Lightsquared’s and the combined spectrum will be useful in a cellular network.

Why Is Dish Hunting For Spectrum?

Buying LightSquared’s spectrum will allow Dish to offer high-speed Internet service across the country. Currently, the satellite company offers video services, but its satellite based Internet service isn’t as fast as those from wired providers. The company wants to compete better in the saturated U.S. pay-TV market by offering a viable bundling option where it can combine its satellite service and already acquired wireless spectrum licenses to offer consumers a single subscription for video, data and voice. Dish could either build its own network that could be expensive and time consuming, or it could buy an existing wireless carrier such as T-Mobile U.S., which can provide ready-to-use infrastructure.

Dish sees this bundling potential as a growth opportunity. Pay-TV penetration is currently very high in the U.S. with more than 90% of the U.S. TV households subscribing. Given the saturation level and slowdown in the housing market, it is difficult to see a significant increase in the number of the U.S. pay-TV subscribers and the spectrum licenses appears to be the key to enter into a new business.

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Notes:
  1. Dish May Be In Total Control of LightSquared Spectrum Auction, Yahoo Finance, Oct 2, 2013 []
  2. Dish Network’s SEC Filings []
  3. Dish Network’s Investors Hope for a Clearer Signal, The Wall Street Journal, Aug 4, 2013 []
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