Private equity firm Centerbridge Partners has backed out of its deal to acquire LightSquared, worrying that the latter would burn hefty amounts of cash while waiting for approval from regulators.  Centerbridge had recently partnered with Harbinger Capital Partners and Fortress Investment Group to bid $3.3 billion for the bankrupt LightSquared. 
This news should bring some relief to Dish Network (NASDAQ:DISH) which has been eying the 40 MHz of LightSquared’s wireless spectrum and has a $2.2 billion bid in place. LightSquared’s spectrum is particularly aligned with Dish’s requirement, and the company’s co-founder Charlie Ergen is LightSquared’s biggest creditor with more than $1 billion in secured debt.  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 has been hunting for spectrum for quite some time and has ambitions to enter into the wireless industry given the saturation in the pay-TV market. It will be interesting to see how the events unfold hereon and if Dish is able to secure LightSquared’s spectrum.
Why Is Dish Eying LightSquared?
Dish and LightSquared have had a similar vision of an LTE network. LightSquared with its ambitious LTE plans was able to interest investors initially but soon met with roadblocks. In early 2012, the Federal Communications Commission (FCC) moved to bar the company’s planned national broadband network after being advised by the National Telecommunications and Information Administration (NTIA) – the federal agency that coordinates spectrum uses for military and other federal government entities. The issue with LightSquared’s airwaves is that they are similar to the ones used by Global Positioning System (GPS) navigation systems and can cause interference. However, earlier in May, the FCC chief said that he expects LightSquared to eventually win approval for using its airwaves as they are too valuable to be left unused. 
LightSquared’s spectrum is particularly beneficial for Dish given that it 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.  Currently the value of Dish’s overall spectrum base is worth about $11 billion.  Even if Dish succeeds in acquiring this spectrum, it will have to wait for the majority of LightSquared’s airwaves to be cleared by the FCC. It may be able to use some specific portions sooner nevertheless.
Meanwhile Dish has submitted an application to the FCC to give it flexibility to use its existing spectrum for downloading information and 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. Dish Network’s bid for LightSquared assets doesn’t include downlink frequencies. In light of the Centerbridge back out, Dish is closer in its quest to win LightSquared’s spectrum.Notes:
- Centerbridge Won’t Proceed With Deal to Buy LightSquared, The Wall Street Journal, Dec 17, 2013 [↩]
- Centerbridge Reaches Tentative Deal for LightSquared, The Wall Street Journal, Dec 11, 2013 [↩]
- Dish Network & Charlie Ergen Sued By Shareholders Over $1B Debt Purchases, Deadline, Sep 26, 2013 [↩]
- FCC Chief Sees LightSquared Getting Cleared for Airwaves, Bloomberg, May 8, 2013 [↩]
- Dish Network’s SEC Filings [↩]
- Dish Network’s Investors Hope for a Clearer Signal, The Wall Street Journal, Aug 4, 2013 [↩]