Auction 113 Risks Dropping for EchoStar

Gross proceeds for Auction 113 as of round 40 yesterday were $1.8 billion. The re-auction of 200 Advanced Wireless Services (AWS) licenses began slowly but the pace picked up last week. The bands being auctioned are: 1695–1710 MHz, 1755–1780 MHz, and 2155–2180 MHz. 

Licenses with more than one bidder stood at 173 and 27 licenses had one bidder. Unlike the first few rounds, now no licenses go without bids.

Before the original auction of these licenses, DISH formed partnerships with two Designated Entities who won licenses with gross bids that totaled more than $13 billion. They paid about $10 billion in total using 25 percent discounts. 

At the time, the FCC said DISH had “de facto” control of the DEs, making them ineligible for bidding credits. The upshot? DISH owed $3.4 billion more than it paid for the licenses. Instead of paying, DISH returned the licenses, then made an interim payment of $516 million, or 15 percent of the $3.4 billion outstanding balance in 2015, Inside Towers reported.

Just before the start of this auction, DISH owner EchoStar (NASDAQ: SATS) and the FCC came to an agreement that makes EchoStar responsible for any shortfall between the $3.4 billion and the re-auction gross proceeds. If the gross proceeds equal the outstanding obligation, EchoStar would owe nothing.

New Street Research says, “We think the risk that the auction falls below $2.9BN is reduced at this point and SATS investors can breathe easier about any DE auction liability while feeling better about the mark on the remaining AWS spectrum holdings.”

By Leslie Stimson, Inside Towers Washington Bureau Chief