Dish Selectively Defaults

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Dish Network’s Designated Entities (DE) notified the FCC on Thursday that they are selectively defaulting on $3.4 billion of the $13.3 billion of licenses they won in the AWS-3 auction earlier this year. Jonathan Chaplin at New Street Research explained, “. The licenses will now be re-auctioned (we think in mid-2017 at earliest) and the DEs will face penalties for defaulting. We suspect DISH is paying a penalty in order to preserve optionality; this is likely a smart financial move (albeit risky).” Chaplin outline a few possible scenarios.

In one, Dish will pay a penalty to delay payment on the licenses that they will ultimately own. The penalty is about what the cost of funding would be on the $3.4 billion between now and the re-auction. Between now and the re-auction, Dish will be able to keep the three billion dollars, which they could use for other opportunities. Another option is that Dish could pick up some low band spectrum at a much better value during the upcoming auction, especially now that Sprint is out and Verizon is on the fence. “Dish already has a ton of mid-band; if they deploy spectrum they will want both mid and low-band, and the low-band may just be a better value,” Chaplin explained.

The 197 licenses acquired by the Des will be returned. The analyst explained that these licenses cover about 125 million POPs. 193 of the licenses are 5×5 pairs in the G, H, and I Blocks; 3 licenses are 10×10 pairs in the J Block, and; 1 license is 5MHz unpaired A1 Block. “There are too many potential outcomes to know whether DISH will win or lose by relinquishing these licenses now,” Chaplin explained. It’s all speculation at this point, but time will tell how Dish plans to play this game.

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