Dish Network Corp (DISH - Analyst Report) is facing charges from a federal whistleblower and some of its business partners, claiming that the company owes about $540 million to the Federal Communications Commission (FCC). Dish Network has supposedly claimed unscrupulous discounts in relation to the AWS-3 wireless spectrum auction held in 2014.
Source of Conflict
Dish Network had participated via three designated entities (DE) – American AWS-3 Wireless, Northstar Wireless and SNR Wireless – in the spectrum sale. Since these DEs qualified for small business discounts under FCC rules, Dish Network claimed a 25% concession, which amounted to $3.3 billion.
In Aug 2015, the FCC reversed its decision to offer the discount to Dish Network. As per the lawsuit, the company agreed to return 27% of the spectrum licenses it had won in the auction and also agreed to pay $540 million to cover the FCC’s cost of auctioning the returned licenses.
Dish Network’s Response
In its defense, Dish Network stated that the latest lawsuit holds no merits and that the federal government has refrained from getting involved in the legal proceedings. Notably, Dish Network had challenged the FCC’s verdict over the spectrum issue. The company argued that it has been quite clear with the DEs about the terms and had received FCC approval for the same.
The Bottom Line
Dish Network has been steadily building its wireless spectrum portfolio to prepare ground for the launch of its wireless TV services. The company’s pay-TV business model is facing serious customer churn to over the top (OTT) service providers like Netflix Inc. (NFLX - Analyst Report) . Additionally, wireless players like Verizon Communications Inc. (VZ - Analyst Report) and AT&T Inc. (T - Analyst Report) have come up with video streaming apps like Go90 and DIRECTV Now, respectively. Dish Network has also launched Sling TV app to offer Internet TV to its subscribers. To expand its Sling TV service and possibly launch its wireless service, Dish Network is in need of wireless spectrum. Thus, it is imperative for the company to preserve its spectrum portfolio.
Dish Network currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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