Why Dish Network Wants Higher Spectrum Prices, in AWS Auction

Typically, would-be acquirers of new mobile spectrum would prefer to pay lower prices. Sometimes, though, a bidder might actually act to increase overall prices. That appears to be the case for the on-going U.S. auction of AWS spectrum.

The actual identities of bidders are secret, but Dish Network, which has three entities able to bid, actually has a valid business reason for desiring higher prices. Dish Network purchased similar spectrum earlier in 2014, namely a paired 10-MHz block of spectrum that runs from 1,915-1,920 MHz (for the uplink) and from 1,995-2,000 MHz (for the downlink). Dish also controls 40 MHz worth of spectrum adjacent to those frequencies.

If the current AWS auction prices climb, the value of spectrum Dish Network already owns should climb as well. That, in turn, should boost Dish Network’s stock price, which in turn would become a currency to be used for additional transactions, perhaps a bid to buy T-Mobile US, for example.

Some would argue the current AWS auction prices boosted Dish Network equity value equity value 10 percent.  Some also would estimate the value of Dish Network spectrum usable to support mobile communications mobile communications at more than $12 billion.  

Others might peg the value of potential mobile communications as representing most of Dish Network’s equity value, in excess of 75 percent of the firm’s market value. That is a stunning thought, for a company with 14 million video customers and zero mobile customers.

Skeptics might argue that all prior efforts by Dish Network to reinvent the company have essentially failed, though.

Of course, Dish Network could decide simply to sell all of its spectrum, and not become a mobile operating company. But that entails risk as well, since some of the equity valuation of Dish Network includes the assumption it will become a mobile service provider, adding not only subscribers, new product lines, revenue and cash flow, but giving Dish Network an opportunity to escape the clutches of a declining business (satellite TV entertainment).

But some might well question the viability of a fifth national U.S. mobile provider, leading to speculation Dish Network “has” to buy T-Mobile US.
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