Dish Network Likely to Be Biggest Bidder in H-Block Auction, Analysts Say

The value that Dish places on H block is key, said Jeff Silva, a Medley Global Advisors analyst. “You'd have to look at Dish as a favorite, not only because the H block would supplement what it has, but also because of what it might get from LightSquared.” A Wireless Bureau public notice showed 34 applications for H-block bids (http://bit.ly/1bgTpXd). Some of the potential bidders include Lynch 3G Communications and CTM LLC, it said.

It’s possible that Mario Gabelli, an investor and partial owner of Lynch 3G, or another of the applicants could emerge, Silva said. But considering what Dish has been building over the past few years and how it has been accumulating spectrum, “it is cobbling together an impressive spectrum portfolio. ... In that sense, they may value it [H block] more than anybody else."

The “wild card players” aren’t likely to buy up all of the licenses since Dish’s AWS-4 spectrum is adjacent, said Tim Farrar, independent analyst. “I don’t see someone else coming along and bidding $2 billion to outbid Dish.” If another bidder bought all of the licenses, then it would likely be “a little bit at Dish’s mercy in terms of them having the possibility to hold up the standardization process,” he said. “I think that’s why the big players shied away from it.” But “if Dish owned 70 or 80 percent of that spectrum across the country, they'd be interested in doing the standardization, then whoever owned the remaining 20 or 30 percent of it could benefit from that,” he said.

A surprise outcome is possible, given the number of bidders and the resources some of them have, said Paul Gallant, a Guggenheim Partners analyst. But “this still looks like Dish’s game to lose, because the spectrum is simply worth more to them than anyone else,” he said.

The FCC hasn’t made a decision on Dish’s request to have the option of using AWS-4 spectrum for uplink or downlink operations (CD Dec 5 p17). Dish said it wants the request approved 30 days before the Jan. 22 auction. That is “a done deal,” said Farrar. The only question is going to be whether the FCC gives Dish the 30 months that it has requested to make that decision, he said. The commission could come back and propose a shorter deadline, he said. If the commission wants to auction the J block next year, “how can you auction the J block without knowing if it’s [AWS-4] going to be downlink or uplink?” he said.

"The FCC hasn’t taken action publicly and officially, but we don’t know what signals Dish is getting from that,” Silva said. On one hand, the H block spectrum could enhance Dish’s spectrum portfolio, he said. But on the other hand, if Dish needs the regulatory relief to further execute its business strategy, “one doesn’t know where the pull on those is going to be greatest,” he said. If there’s no decision by Dec. 23, Dish “could still decide that they still need it and roll the dice, knowing that either they could get regulatory relief after the fact or they might not get it at all,” he said. Granting Dish’s request “seems like a win for the agency and as well as most of the parties affected by Dish’s proposal,” Gallant said.

Release of the applications helps, they said. “Probably the most helpful info is that none of the four big wireless carriers are bidding,” Gallant said. There’s the confirmation that the bigger players aren’t involved, Farrar said. “The benefit for Dish is the FCC can’t back away from this deal of granting the waiver.” It’s also helpful because of the LightSquared bankruptcy proceeding, he said. Knowing what the situation is there plays into Dish’s decisionmaking as to what to do with LightSquared, he said. “Knowing who you're bidding against gives transparency,” Silva said. “This is an input into Dish’s strategy and thought process.”