Dish Network may lose ownership over $3.3 billion worth of valuable midband spectrum licenses in the AWS-3 band, reports from several sources indicate.
Specifically, according to Tweets from reporters at TR Daily and Fox Business, the FCC unanimously ruled that entities linked to Dish should not receive small business discounts for spectrum they purchased in 2015.
According to Walter Piecyk, a financial analyst with LightShed Partners, the issue now will likely be decided in a courtroom.
Officials for the FCC and Dish Network declined to comment on the reports.
If the reports prove accurate, the FCC's ruling would represent a significant setback for Dish. The company had partnered with two bidding entities called Northstar Wireless and SNR Wireless in the FCC's AWS-3 spectrum auction in 2015. The bidding entities qualified as "designated entities," or DEs, which made them eligible for a 25% discount intended for small businesses.
Those two entities ended up winning a combined total of $13.3 billion worth of spectrum in the 2015 auction. But the amount they would have paid to the federal government would be reduced by around $3.3 billion if they were deemed eligible for that small business discount.
However, the FCC ruled that the two DEs should not receive the discount because they were financially too close to Dish. As a result, Dish relinquished AWS-3 licenses in the amount of the discount, and then appealed the decision. A court sent the issue back to Dish to rework its financial relationship with the DEs to align with FCC rules, which Dish did in 2018. The FCC has been evaluating the situation since then.
"They've been in limbo for five years now," argued Dish chief Charlie Ergen during the company's recent quarterly conference call with analysts, according to a Seeking Alpha transcript. "And it's a little bit unfair. ... Obviously, in any business, you'd like to have certainty. Whatever that certainly is, you'd like to have certainty, [it's] just better than uncertainty."
The financial analysts at New Street Research wrote that, if the reports of the FCC's ruling prove true, Dish can appeal the decision in court. "If Dish loses, the licenses would be reauctioned by the FCC. To the extent that the licenses are sold for less than $3.3 billion, Dish would have to pay the FCC the difference between the $3.3 billion and the new sales price. If the new price meets or exceeds $3.3BN, Dish faces no further liability," the analysts wrote.
Continued the New Street analysts: "We expect strong bidding for the licenses; AWS spectrum now sits at the core of the networks for all three national carriers, and Dish relinquished licenses that fill holes in Verizon’s AWS-3 holdings. Dish will undoubtedly be a bidder too. We would expect them to bid up to the $3.3 billion they bid last time around (or something very close), and either walk away with the licenses or with no further liability."
Importantly, the AWS-3 spectrum that's at issue with Dish and the DEs is not part of spectrum licenses Dish has agreed to use as part of its nationwide 5G network buildout. However, Dish officials had undoubtedly hoped to add those AWS-3 licenses to the company's overall 5G efforts, given the sky-high value of that spectrum.
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