Recently, DISH Network Corp. (DISH - Analyst Report) has won the bid for PCS H Block wireless frequencies auctioned by the Federal Communications Commission (FCC). The frequencies can be used in all 176 markets in the U.S. DISH has spent $1.56 billion for these wireless frequencies. This was the first wireless spectrum auction in the U.S. after 2008.
The FCC will use the proceeds to develop a nationwide wireless communication network for emergency services. Notably, DISH is the only major company filing for applications. The remaining 33 companies, which include the likes of NTELOS Holdings Corp. (NTLS - Snapshot Report), CSpire, Piedmont Rural and James Valley Cooperative Telecom, are small regional telecom operators.
DISH, the second largest satellite TV operator in the U.S., has constructed an extensive wireless/satellite spectrum base over the last seven years. The company’s current spectrum holding is 56 MHzs for which it has invested around $5 billion since 2007.
In 2012, the company purchased 2 slots of the 40 MHz S-band wireless spectrum fromthe 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.
Although DISH received the FCC approval to deploy a nationwide wireless network, it came with a restrictive condition. The constraint specifies that the wireless network deployment can be executed using a truncated power level.
The regulator claimed that a reduction in DISH’s frequency level is required to avoid interference with an adjacent PCS H Block frequency which it recently auctioned. The newly acquired radio spectrums will significantly raise DISH’s power and emission levels to establish a profitable venture in the wireless market.
We believe DISH’s attempt to enter into the wireless market is a diversification strategy to counter pay-TV market saturation. DISH 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.
In 2013, DISH lost to Softbank of Japan in its attempt to acquire Sprint Corp. (S - Analyst Report). There were rumors in the industry circle that DISH may opt for T-Mobile US Inc. (TMUS - Snapshot Report) in the first half of 2014. However, DISH recently declared that it will not outbid Softbank in its effort to acquire T-Mobile US also. DISH currently has a Zacks Rank #3 (Hold).