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Recently, DISH Network Corp. (DISH - Analyst Report) has won a favorable ruling to take part in the upcoming spectrum auction of LightSquared Inc. In May 2013, DISH offered a bid of $2.22 billion to acquire 40 MHz of wireless spectrum held by LightSquared, which is currently bankrupt. However, Harbinger Capital Partners, the principal owner of LightSquared, objected to this bid stating that DISH has resorted to fraudulent means to enter the bidding process.  

Last Monday, a Manhattan bankruptcy judge approved DISH’s bid and has set Nov 25, 2013 as the auction date. Earlier, the Federal Communications Commission (FCC) had refused the use of this particular airwave as it was interfering with the global positioning system. This has led to LightSquared’s bankruptcy. Later on, the FCC conducted more tests on the spectrum and eventually permitted an auction with a few modifications.

DISH has constructed an extensive wireless/satellite spectrum base over the last couple of years. In 2012, the company purchased 2 slots of the 40 MHz S-band wireless spectrum from bankrupt TerreStar Networks Inc. and DBSD North America Inc. for a consideration of $2.9 billion. Moreover, the company owns a slot of 700 MHz airwaves. DISH is the second largest satellite TV operator in the U.S. after DIRECTV (DTV - Analyst Report). The U.S. pay-TV market is intensely competitive. Competition emerge from the fiber-based video offerings of telecom giants, cable MSOs and online video streaming service providers.

We believe DISH’s attempt to enter into the wireless market is a diversification strategy to counter pay-TV market saturation. The company enjoys the opportunity to collaborate with several established telecom or tech companies to jointly establish a wireless network. Earlier, DISH failed to acquire Sprint Corp. (S - Analyst Report) from Softbank of Japan.

In May 2013, the company executed a Letter of Intent with regional wireless network operator, NTELOS Holdings Corp. (NTLS - Snapshot Report) to deploy a fixed-mobile broadband network to offer high-speed Internet services to areas served by NTELOS. Accordingly, on Jun 17, 2013, the two entities jointly launched broadband service across rural Virginia by utilizing 2.5 GHz band of airwaves. DISH currently has a Zacks Rank #5 (Strong Sell).

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