Weighing Dish’s Prospects for Success in Its Quest to Become a Wireless Carrier

Satellite service Dish Network (NASDAQ:DISH) may be disappointed that the Federal Communications Commission decided to field public comments on and conduct a full evaluation of the company’s plans to offer wireless cellular service using newly acquired spectrum. But its investors likely aren’t going to run for cover.

Shares in the Meridian, Colo.-based company continue to trade near its 52-week high of $29.76 because investors know that the spectrum Dish owns is valuable and, at least for now, gives the company a lot of control over its own fate.

Dish wants to use the spectrum to build a high-speed wireless network and offer cell phone service to compete with companies such as AT&T (NYSE:T) and Verizon (NYSE:VZ), which already offer cellular service. But Dish will have to wait at least until year’s end for the FCC to complete deliberations on how Dish’s spectrum should be used. Dish acquired the licenses to the spectrum after it bought satellite networks owned by DBSD and TerreStar out of bankruptcy last year for $2.8 billion.

No one seems particularly worried that the FCC will nix Dish’s expansion plans. The agency has said that rules governing the type of spectrum Dish owns should be changed to allow for its use in ground-based wireless networks. Also, in recognizing the need for more spectrum dedicated to high-speed wireless communications, lawmakers recently gave the FCC permission to auction the spectrum owned by broadcast TV channels to companies providing mobile services.

A more cautious approach to proposal evaluations

As noted in a recent post by the Wall Street Journal, the FCC is still smarting from the fallout over a waiver it granted to LightSquared, a wireless service that planned to build a mobile network using satellite technology. That plan was withdrawn and its approval rescinded after the Defense Department said that LightSquared’s system would interfere with GPS devices.

The FCC’s decision to carefully evaluate Dish’s plans gives competing wireless carriers time to expand their 4G wireless networks and implement high-speed LTE (long term evolution) technology to increase data speeds and strengthen their competitive advantage in the cell phone market.

Major wireless carriers such as AT&T, Sprint (NYSE:S), and AT&T are facing network-capacity constraints as subscribers increasingly use their smartphones for bandwidth-intensive data streaming and data-heavy downloads. As a result, mobile operators are hunting for more spectrum.

Spectrum squeeze

Verizon, for one, has struck deals to buy spectrum from cable companies Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC), privately held Bright House Networks, and Cox Communications. The deals also would enable the companies to cross-market each other’s services. Verizon’s plan has prompted its competitors to ask the Federal Trade Commission to block the deals because, they say, the acquisitions would give Verizon an excessive concentration of spectrum. Dish and AT&T, meanwhile, may make attempt to forge a similar deal, or Dish could look for merger opportunities with other spectrum owners such as MetroPCS (NYSE:PCS) or Leap Wireless (NASDAQ:LEAP). Dish may even entertain merger opportunities with Sprint or Deutsche Telekom’s (PINK:DTEGY) T-Mobile.

So despite the FCC’s procedural decision, and warnings from Dish’s chairman, Charlie Ergen, that the delay could compromise the plan’s chances for success, Dish has a couple of potentially strong hands to play.

Article printed from InvestorPlace Media, https://investorplace.com/2012/03/weighing-dishs-prospects-for-success-in-its-quest-to-become-a-wireless-carrier-dish/.

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